While hard money loans close much quicker than traditional loans, most fix & flippers have strict deadlines and need funding fast. How can you make the process smoother?
Few things are more of a headache than the long wait for a hard money lender to close your loan. It can be especially frustrating when you’ve worked with the lender before, but they still won’t hand over your money quickly. Yet, when you try to touch base, you continue to hear, “We are in the process of closing.” What gives?
As a hard money lender who’s also a real estate investor, I know you’re on a deadline, so I want to give you some insight on what the closing process looks like and a couple of ways you can trim a few days off the timeframe to get your money transferred over as quickly as possible.
How Long Does it Usually Take to Close on a Hard Money Loan?
Each lender will have its own timeline for closing on a hard money loan. Here are a few of the top lenders and their average closing times to give you an idea of the timeframe.
|Hard Money Lender||Average Closing Times|
|The Investor's Edge||12 Days|
|RCN Capital||10 Business Days|
|VisioLending||21 Business Days|
|Lending Home||30 - 50 Days|
|Lending One||10 - 14 Days|
|Anchor Loans||1 - 2 Weeks|
|Lima One||10 Days|
|Rehab Financial||14 Days|
That’s a broad spectrum! So what’s taking so long?
What’s Going On During that Time?
To peel back the curtain a little, here’s what’s happening during those twelve days The Investor's Edge or other lenders are closing on your loan.
We’re doing our due diligence. This is the time we’re dotting the i’s and crossing the t’s to ensure all the bases are covered for your loan. A traditional lender’s due diligence typically involves background and credit checks, but since hard money lenders don’t need these, your timeline for closing is significantly shorter. Instead, we’re reviewing your property documents again and making sure everyone’s on the same page.
We’re creating the loan documents and repayment structure. Every loan is different and needs its own set of paperwork, due dates, and payment methods, so we’ve got to set those up and have all related documents reviewed by our attorneys. The attorneys have their own timelines, so we’ve got to wait on those, too.
We’re working with the title company, setting up your SPE, getting your hazard insurance ready, and a lots of other (boring) paperwork.
We’re getting your cash. Unfortunately, we’re not sitting on giant piles of cash and having money fights in the office. To get your loan wired over to you, we need to pull it from some other places before we can close.
A few things can slow down this process, so let’s talk about how you can make this as smooth as possible to get your money ASAP.
Tip 1: Choose a Hard Money Lender that Specializes in Your Market
Due to government regulations, lenders (both traditional and hard money) can only operate in states where they’re registered. Make sure your potential lender can operate in your state and works in hard money loans. You might end up wasting critical time barking up the wrong tree and have to start all over, just now with less time before you acquire ownership of the property.
Tip 2: Get Pre-Approved
Hard money lenders can offer pre-approvals to qualified applicants, but each has its own set of requirements. Still, doing the work ahead of time to get pre-approved will significantly speed up the amount of due diligence your lender will have to do and get you a faster closing date.
The Investor's Edge has a ridiculously easy process for pre-approval. All you’ll need to do is fill out a form and receive a short follow-up phone call.
Tip 3: Apply for the Loan As Soon As Possible
All lenders deal with multiple applications a day and it takes time to process them. Most hard money companies will process applications in the order received. If you’re up against a tight deadline, get your application and any supporting docs in the instant you can to save your spot in line.
Tip 4: Get All Your Paperwork Ready and Sent Over
To get a faster closing date, you’ll need to have all your ducks in a row and over to your lender. Make sure your application is filled out in full and provide supporting documentation that shows how much you’ll need, how the money will be used, when it will be used, and how your work will affect the property’s value.
Ask your lender ahead of time what documents they’ll need, but at the minimum, you should expect to provide (in addition to your application):
- Letter of Intent
- Appraisal showing either the current or after-repair value (ARV)
- Itemized scope of work
- Deed of Trust
- Personal guarantee
- Financial statements
- Proof of income
- Proof of title insurance
Bonus Tip: Be Accessible
If your lender can’t get ahold of you to correct mistakes or ask questions, you’re going to make it more difficult to get funded. Take your phone off of silent mode, add their domain to your email safelist, and follow up whenever you send something over, like appraisals or scopes of work. If your lender has difficulty getting the things they need because you’re MIA, then your loan could be denied outright, sending you back to square one.
If I could sum it up, I’d say: the easiest way to get a fast closing is to be on top of things and stay proactive. The sooner you get your lender what they need, the easier it will be to get those funds in your bank account. If you’re ready to get started, we’d love to help grow your real estate business. Learn more about our 100% hard money financing and why many of our clients end up needing to bring $0 to the closing table.
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