Borrowers seeking hard money loans are usually in need of these funds fairly quickly. This can be for myriad reasons, including the following: other loans or notes are coming due (on that property or another in their portfolio); the current or planned funding for the property has been interrupted or has fallen through unexpectedly; they wish to purchase a property quickly because it is being sold for much less than its actual or potential value; or a bank has demanded repayment of a note or loan without enough notice to arrange for another conventional loan.

Hard money lenders do not have to follow the strict requirements that restrict banks and other institutional lenders from funding loans that are out-of-the-box or to borrowers with blemishes on their credit history. Instead, these lenders rely on their knowledge of real estate investing and the local market to determine whether a loan is a good investment or not. Each hard money lender has their own requirements for borrowers to meet, but the following checklist can help you be prepared to answer a lender’s questions quickly and efficiently, thus reducing the amount of time needed to secure approval and close on your loan.

1.      Describe the collateral that will secure your loan. Your hard money lender will want to know the details of the asset securing the loan: what the asset is or how it is classified/zoned; what the value of the asset is and how that value was determined (e.g., local comps, an appraisal, or a broker’s assessment); where the asset is located and whether it is accessible for inspection; if the asset has any encumbrances or liens against it currently; and who holds the title to the asset now.

2.      Identify who is borrowing the money. The lender will want to know if the loan is being made to an individual or to an entity (i.e., an LLC or other type of corporation).

3.      Explain precisely how the funds will be used. Lenders will want to know how the funds they underwrite will be spent, especially in the event of a cash-out loan or any other circumstance in which the entirety of the loan is not put towards the purchase of the asset itself. Hard money lenders will often be willing to include additional funds to cover construction costs or loan payments until a property becomes income-producing again, but they will want the borrower to account for exactly how any additional funds are spent.

4.    Fill out a basic loan application. Most lenders will require the primary borrower to fill out an application with their basic information such as their social security number, birth date, list of other assets, etc.

In addition to the basic loan application, it is a good idea to have a business plan and an executive summary to share with the lender. Much of the information in the first three items on this checklist can be included in a business plan and executive summary so that the information is presented to the lender in an easily digestible format. Color photos of the property and any structures on it as well as a preliminary title report can also speed up the information-gathering stage of applying for a hard money loan and thus result in speedier closing times. Borrowers should check with their broker (preferably one with experience closing hard money loans) or their hard money lender to find out if they require any additional information, so that they can be prepared to provide all necessary information upfront.