Hard money lenders are the best option for investors. Why? This is because funds are released in time and they required less paperwork to conventional lenders. However, their less stringent rules do not mean documents are not required before funds are released. So, if you need a home loan and do not qualify for conventional loans, here are documents you need to prepare before submitting a loan application to them.
The loan agreement is the basis of any loan. It provides a general overview of the Loan. Unlike the other documents, the loan agreement is general; which means, it can be executed before any deal is made between both parties. It usually includes specific information about the loan like the total amount of the loan, interest rate, term of the loan, description of the loan, rules, and regulation agreed upon by both parties and what could happen if payments are not made.
Deed of trust
Deed of trust also known as trust deed is a document that assigns a trustee or custodian to take control of the property documents during the term of the loan or while the loan is active. This document allows a third party to serve as a mediator between both parties. The work of the trustee is to ensure that both parties (the lender and the borrower) abide by the rules, processes and follow the deadlines during the term of the loan.
However, the work of the trustee ends after the loan is paid in full and he/she would turn over the property deeds to the buyer (borrower) while the lender’s closing agents file all the necessary paperwork as the law require.
Proof of fund
As a property investor, you should understand that no lender will take you for your word. This is why you should always have a written document to support your claims. The proof of fund is a document that shows the amount of cash that you can bring to the closing table. This document usually helps proof to the lender that you are capable to pull a deal. Proof of fund documents can be a recent bank statement or other statements of accounts.
Preliminary Title report
A preliminary title report is a document that shows the current owner of a property. It also includes the liens and other encumbrances that would not be included if a title insurance policy is issued. This document usually contains the condition under which the title company can issue title insurance to the property owner.
The promissory note, as its name implies is a short and simple financial document that contains a written promise by one party (the borrower) to pay another party (the lender) a total sum of money at a specified date. From the real estate viewpoints, the note imposes a repayment obligation on the borrower. The promissory note usually contains all the terms relating to the loan which usually includes the principal amount, the interest rate, maturity date of the loan, place, and date of issuance, the borrower’s signature, and the rules that the trustee (assigned in the trust deed) will follow when the borrower fail to pay.
Bid of Repairs
A bid of repair is the written estimates which the investor receives from contractors concerning the property repair. The main purpose of this document is to show the lender the total cost of repair needed to be done on the property. However, from the lender’s viewpoint, the bid of repair helps them to check if releasing funds to the investor is viable or not.
Miscellaneous documents include the credit report, loan application, copy of a lease or rental roll. These documents are required but do not determine your fate of getting a loan or not.