Our Approach To Loan Underwriting!

When it comes to our approach to loan underwriting, our process is simple, and yet many new investors are still not aware of how a private lender can help them. It’s no secret that private lenders are much different from banks with their regulations, guidelines, and committees that torment lenders with overwhelming piles of paperwork and slow down decision making, which in the end fails to serve the needs of many prospective investment customers. Consequently, these customers seek alternative sources of financing. These entrepreneurial borrowers often turn to private real estate investment loans because they have difficulties coping with bank requirements.

Private Underwriting Process Requires Less Paperwork

As we have already discussed, banks require mountains of paperwork and excellent credit is a mantra that restrains banks to superficial credit risks. Because of their requirements, weeks can very quickly turn into months and even then, banks will often say no, even after they go deep into the process.

We can’t speak for other private real estate lenders, but Abbey Mortgage focuses on a simple underwriting process with decisions made based on the essentials of the deal.

1. Our Approach to Loan Underwriting Means Getting to Know the Investor/Borrower

Before we get into the underwriting process, we will ask ourselves, do we have confidence in our borrower’s ability to do what they say they will do? For new investment property borrowers, this means going through a review process and meeting them to get acquainted:

• What have they done?
• How have they done financially?
• Does this transaction fit their skills base?
• Credit Scores play a minor role, but we pull them to see how payment history fits with the past performance of the investor.
• Are we confident they will be able to get the job done?

2. Skin in the Game Is Key To Success

Does our borrower have a significant cash investment in the project? It’s one thing to sign a note to a lender based on the “value” of the property, and it’s another to have cash invested. As the saying goes, “cash talks, you know what walks.” It is clear when analyzing loan default information that borrowers with low or no down payment tend to default on loans at a substantially higher rate. The bottom line is that the more the borrower risks their own money, the more likely the loan will get repaid.

3. The Property Drives the Loan Decision in Our Approach to Loan Underwriting

The property represents the keystone of the loan. It holds the whole transaction together and will be weighed heavily in our underwriting process.

• What is the investor going to pay?
• What needs to be done to enhance the property, and what will it cost?
• Will the rent support the loan upon completion?
• What value will the deal yield, and is the margin of profit worth the effort?
• How will we get repaid, and what is plan “B”? If the whole deal falls apart, how do we, as the lender, save our investment?

Every Underwriting Process Requires Documents; We Require Less!

Now that you have read our three-step process, you will know, if you have ever dealt with a bank, how straightforward our documentation requirements are. How we work is based on the fact that we only do loans for investment and business purposes, and the fact that we loan our own money allows us to bypass consumer and regulatory requirements.

The final result is that we offer a prompt yes or no, and we fund the deal. After all, our borrowers rarely have time to wait for a slow, no answer, and a slow yes is even worse since the time for action is past.

Who Can Qualify for a Private Investment Loan?

Many of our borrowers can qualify for bank loans however time can all too quickly become a factor when they need money in a week or two versus two months. Things can get really interesting when a borrower has had some rough financial experiences, which tend to freak out bankers. On the other hand, we view these issues as the borrower’s hard lessons and their degree in the business. Heck, some have earned Ph.D.’s! These folks know what to do, but sometimes it just doesn’t work out for whatever reason. We lend to them, and they are often our most reliable customers.

We work hard to help our borrowers avoid the pitfalls of funding their investment aspirations!

Borrower’s in search of real estate loans? Call Us Today!