Hard Money Rehab Loans – Reasons For Loan Turn Downs

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It’s not uncommon for a deal to make sense to a borrower, only to be turned down by the lender. There are many reasons a lender may decline a loan. We will look at the three most common reasons that almost every hard money lender gives for declining a loan even if the numbers on paper make sense.

So what are those three reasons? Let’s find out below –

Value


Value is the top reason for a loan to be declined.  Borrowers typically believe their property is worth more than it really is.  It is important for real estate investors to avoid falling into this trap.  Step back and look at the deal through a third party point of view.  Try to poke holes in the value.  Drive by the property, drive by the comps, look and see if they are really comparable.  Are the neighborhoods comparable?  Are the homes comparable?  Try to make a case for the value being less – and when you find a deal where you cannot poke value holes then you know you have a winner.

Location


Most of the hard money lenders prefer to lend in the major metropolitan areas where sold comparable ranges from ¼ mile to ½ mile away. Therefore, if your property is located outside a major metropolitan areas in a rural neighborhood where there is no sold comparable within 2 miles of  the subjectproperty, your chances for having a difficult time finding a loan increase. The real estate deals in rural areas often seem to be great deals on paper, but if no sold comparable are nearby to support the value with solid, close comps, then hard money lenders may very wellturn the deal down.

Cash Reserves


An undercapitalized borrower can also face a declination of loan, especially when it comes to hard money lending rehab loans. Usually, lenders want to make sure that the person they are lending a loan can afford to carry the loan. Also, a hard money rehab lender wants to ensure that the borrower has an emergency fund in case there are overruns or unforeseen circumstances. If the borrower does not qualify under these criteria, the loan gets declined.

Has your loan been declined? Do you know the reason of declination? Or are you a hard money lender and have declined any loans? Whatever might be the case, do share your loan declining reasons here!

Conclusion:


All California Lending specializes in hard money rehab loans in California, and have investors willing to make loans that others may decline. They have years of experience in the financing field.
Location: California, USA

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