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How to Communicate With Hard Money Lenders

Money Lenders

Money Lenders

For borrowers and mortgage brokers, the chances of needing to deal with private lenders (hard money lenders) at some point during your search for a loan are becoming greater by the day. Unfortunately, outside of real estate professionals that deal with hard money lenders on a regular basis, very few individuals are skilled at communicating and selling these lenders on their credit-worthiness. The result is a bag of mixed responses from private lenders and a lot of frustration on the part of both mortgage brokers and their clients.

So why is it so difficult to communicate with hard Money Lenders? They’re a tricky bunch because almost none of them are the same. What works for one lender won’t necessarily work for another, and they interpret information in a myriad of different ways. Going around in circles with private lenders can make your head spin and eventually make you think that getting approved for a hard money loan is more difficult than finding a needle in a haystack. But what if you could greatly increase the odds that your loan request will not only get a favorable look from almost all hard money lenders but also increase your overall odds of getting an approval?

There’s a phrase that floats around the Money Lenders: "character counts." The reference is to the character of a borrower, of course, but what constitutes character is defined a number of different ways. For some lenders it means knowledge and experience. Does the borrower seem to have the know-how to move their project to fruition? For other lenders it means mortgage history. Has the borrower ever chosen to walk away from a loan? And for others it almost literally means character. Does the borrower seem to be upstanding, moral and willing to accept responsibility?

We can’t discern what character is going to mean to every lender, and we can’t change who the borrower is. However, there’s an aspect to the term "character" that seems to be nearly universal in the world of hard Money Lenders that you absolutely can control. You have the power to determine how Money Lenders are going to perceive you or your borrower, whether they consider you to be "a hassle to deal with," or if your files come across with promise and potential. The trick is to know how to communicate with private lenders, and while some of these tips may seem trivial, not accounting for them can be the difference between an approval and a rejection.

Money Lenders

1. Be Clear With Your Information

Most Money Lenders  are going to require some sort of executive summary from you, which means that you’re going to have to do some amount of explaining as to why you or your client deserves a loan and how the loan structure will provide a win-win scenario for borrower and lender. Not providing information that’s clear and concise can be an absolute deal breaker, especially when the deal is more complicated, as many commercial scenarios are. Information that isn’t specific, is ambiguous, or is directly in conflict with other information that you’re presenting causes a lender to have to ask questions (assuming they don’t just turn you down). When a lender has to ask questions to decipher your information it takes up their time. The more time they have to take just to understand your information the less time they have for everything else. The less time they have for everything else the less productive they are. So the result is that they’re more likely to brush over your loan request or just reject it all together, assuming that it probably wasn’t worth their time in the first place.

2. Check Your Facts

No matter how busy you are, you have to find time to completely understand the loan request that you’re submitting to a hard money lender. If your file gets reviewed and you’re asked follow up questions you’re going to be expected to know the answer to anything basic. If you don’t know the answer already your credibility is going to take a hit. The lender is either going to perceive you to be a "paper pusher" or a disinterested participant. You may not have any real motivation to see the deal through other than for the prospect of a commission. The result will be a whimsical second look at your information that will probably result in a rejection. After all, why should the lender spend their time if it clearly wasn’t worth yours? Lenders accept files from brokers because they provide a valuable service: an initial screening of borrowers’ files that categorizes them as either having potential to be funded or not worth the time. Make sure that you don’t forget to do your job, because nobody is going to do it for you in this market.

3. Package and Label

There’s a big difference between handing someone a stack of papers and asking them to read through it and handing them a tightly bound file with labeled tabs that allow them to easily access the information that they’re interested in. If you tend to do the former, you’re greatly decreasing your chances of success with Money Lenders. Nobody wants to sort through information, they want to have it presented to them. Consistently packaging and labeling your information in a professional manner goes a long way in determining how you, your borrower and your loan request are received.

4. Don’t Info Dump

Money Lenders aren’t banks, so the information that they require you to submit is going to change from firm to firm. While many basic items may be similar, every lender will have a different flavor that they like. If you simply fire around the same information to a list of private lenders, most of them will receive it and immediately think that you didn’t both to take the time to look at their loan submission criteria. They’ll wonder if you’re lazy, if you’re throwing things around hoping that they’ll stick somewhere, or if you just weren’t intelligent enough to understand what information it was that they typically request. What’s worse is that all of that unnecessary or improperly presented information will just get in the way of the good information and it will take a lot longer for the lender to get through it, again taking more of their time. If their review team isn’t in a good mood that day they may never even get to the good information and you’ll receive a rejection before your loan request ever had a chance.

5. For Goodness Sake, Type It

Deals are overlooked, passed on, put on the bottom of the pile and rejected by Money Lenders every day simply because they don’t want to bother to try to read borrowers’ or brokers’ handwriting. We’re in the year 2011 and Americans are starting to talk about living on Mars by the year 2030 – it’s about time to learn how to type and use the computer. Not all mortgage technology is necessary, but simple word processing is. If you provide handwritten information to a private lender it’s very likely that they’re not going to take you seriously. It’s a harsh reality, but it’s time to make the change if you haven’t already.

 Money Lenders