Regardless of the type of lender (private or traditional), their initial interest in a loan is based on how the borrower characterizes the property and project to them in the initial pitch. The primary purpose of the underwriting process is to verify this depiction and confirm that the reality of the situation matches what sparked the lender’s interest in the deal in the first place. As a borrower, it is important to pitch your loan request in a way that ensures that the underwriting process will support and reaffirm your claims so that the lender’s trust in you is confirmed. This is especially important in the hard money underwriting process as private lenders are far more interested in a borrower’s character and establishing an ongoing relationship than in a borrower’s credit score. 

There are numerous ways in which you as the borrower can streamline the underwriting process, especially for a private lender. Most of these involve obtaining unbiased assessments from respected third parties; this includes appraisals, Phase I environmental assessments, title history and insurance and other due diligence. You can save yourself money by asking your lender for referrals and providing documents from individuals or agencies with which the lender is familiar and trusts so that the lender does not have duplicate your due diligence with assessments of their own. This is also a way for you, as the borrower, to demonstrate your knowledge of the underwriting process and increase the lender’s trust in you. 

Ultimately, the point of the underwriting process is for the lender to assure themselves that they have a high degree of confidence in the borrower’s ability to complete his or her deal and repay the loan according to the stipulated terms. Because the underwriting process takes time and money, a respectable lender will only move forward on loans that they ultimately expect to approve. When loans aren’t approved, it is typically because the underwriting process has revealed potential problems or misinformation about the property that the borrower either did not know or did not share with the lender. This is why it is important to be upfront, open, and honest in your communications with your lender. This is especially true if you are dealing with a private lender, as they are much more likely to suggest a solution to a problem that is shared with them at the beginning of the process rather than one they had to uncover for themselves. They want to believe in you and your deal; being open and honest in your communications will earn you both their trust and their respect. 

If you have questions about Montegra’s underwriting process or referrals for reputable appraisers or assessors, contact us at 303-377-4181 or by email.