How should I approach a mortgage broker for a hard money loan? - Posted by tarun_md

Posted by Ed Garcia on May 16, 1999 at 17:27:23:


I think that?s an interesting observation on your part.
And yes, I agree. I usually would give out my personal information
only after my offer has been accepted.

If the seller likes, they can make it a contingency in their acceptance
of the offer.

In all fairness to the seller, they have a right to know that the buyer is
for real, in allowing them to tie up their property.

On the other hand, it?s obvious that Turan needs this type of document
to help him with his confidence, in making his offer.
He is thinking that if the seller or broker can see that he has a way to go,
then he can negotiate a better deal.

I think a lot of this has to do with experience, and your confidence in deal
making. Each of us have our own way of negotiating.

Ed Garcia

How should I approach a mortgage broker for a hard money loan? - Posted by tarun_md

Posted by tarun_md on May 15, 1999 at 03:43:14:

Last week I saw a mtg broker. I told him that I will need a 50-60% LTV hard money loan on properties. I also told him that most of the time, I will not need the loan cause I will flip these properties to investors before my settlement date. On rare occasions, I might need a short term loan(If I can’t flip before settlement).

I asked him if he could give me a prequalification letter subject to their approval. At this point I didn’t have any accepted contracts on properties to base this 60% loan on.

According to the mtg broker, this was awkward because he has never had anyone come to him for a hard money loan without an accepted contract or a property in mind. On the contrary, I wanted a prequal letter without having a specific property in mind—you know, a letter saying that I am prequalified up to a certain $$ amount subject to their approval. Initially, he told me that in about 4 days he will have the underwriter type up a vague prequal letter.
When I didn’t hear from him in 4 days, I called him and was told that it is their policy to NOT give prequal letters without a specific property in mind and the mtg broker was apparently not aware of this when I met him. I became really dissappointed because I was planning on submitting this prequal letter with every offer I made, thus making me look more credible in front of sellers(banks in particular). I feel that making offers on REO’s without proof of funds or a prequal letter is like wasting time since they won’t belive that I am for real.
Does anyone have a different opinion? Also, is it possible to get a prequal letter at 55%LTV without really having a signed contract in hand(this mtg company wouldn’t give me one because I didn’t have a property in mind) or should I just shop for another broker who will write me such a letter. If so, what should I say to him?
Thank for your help!

Re: How should I approach a mortgage broker for a hard money loan? - Posted by Ed Garcia

Posted by Ed Garcia on May 15, 1999 at 12:00:56:


It depends on your broker.

Some brokers are more sophisticated than others, or at least easier to
work with.

In a situation like yours, what I would give you is a Loan Commitment
letter. This type of document is usually given by a bank, not a mortgage co.
American Heritage Financial is a lending broker, meaning we can actually
lend our own money as well as broker the deal out.

A pre-qual letter and a Loan Commitment letter are basically the same.
In both cases the lender providing the letter, would include weasel clauses
that could get them out of the deal.

If I were to write a Commitment letter in regards to hard money, it would
go something like this.

Mr. John Doe,

American Heritage Financial has agreed to fund you a loan in the
amount of $300,000. under the following terms and conditions.

(1) The loan amount does not exceed 55% of the property value.
(2) The subject property conforms to all compliance?s required by law.
(3) There are no material changes on the information given in regards
to this loan.
(4) The subject property conforms to environmental requirements.

Turan, there is much more, I just gave you this as an example.
I can tailor my commitment letter to fit my customer and what I
want from that customer.

I feel that your broker could do a better job of working with you if
they wanted to. You might look for another broker.

Ed Garcia

Re: How should I approach a mortgage broker for a hard money loan? - Posted by leapfrog

Posted by leapfrog on May 15, 1999 at 09:33:40:

I don’t know if it the same elsewhere, but in Canada, a PERSON can get pre-qualified based on their income----having not determined the property. This gives a buyer more leverage when approaching sellers & gives the sellers some assurance that these buyers will be able to get the financing if the property is then approved for the loan ratio! Hope this is of use.

Follow up qtn for Ed … - Posted by CarolFL

Posted by CarolFL on May 16, 1999 at 09:15:38:

Ed, my tendency would be to NOT automatically submit any such letter with offers … to me a sign of “weakness”, not strength. Think I would take more of a “references available upon request” stance.

Frankly, we have gumption and only submit that kind of thing upon request. Likewise, regularly deny requests to pull credit until something serious is on the table, but will submit a copy of a fairly recent credit report.

Somehow, it seems to me that Tarun is showing some “insecurity” to suppose that such a letter is necessary - what do you think, oh lending-meister?


(Tarun, understand, I am not knocking the approach - just questioning it … may be the best thing since sliced bread for all I know!)

I think you are confused… - Posted by B. L. Renfrow

Posted by B. L. Renfrow on May 15, 1999 at 09:57:30:

You’re referring to two seperate entities; no wonder your mortgage broker is confused. It sounds as if you’re looking for a traditional mortgage loan, not “hard money”. In that case, yes, you could obtain a prequalification letter based on your income and credit score. But that will not provide rapid access to the funds. A hard money loan is asset-based, meaning it is made entirely (or at least primarily) on the basis of FMV/appraisal, NOT on your credit-worthiness. Therefore, you can see how no hard money lender could provide a prequalification letter without a specific property identified.

What you want to do is identify potential hard money lenders you can utilize when the opportunities arise.