{"id":950,"date":"2019-10-20T15:21:34","date_gmt":"2019-10-20T15:21:34","guid":{"rendered":"https:\/\/blog.calhardmoney.com\/?p=950"},"modified":"2021-12-14T10:52:46","modified_gmt":"2021-12-14T10:52:46","slug":"why-hard-money-loan-applications-get-denied","status":"publish","type":"post","link":"https:\/\/www.calhardmoney.com\/blog\/why-hard-money-loan-applications-get-denied\/","title":{"rendered":"Why Hard Money Loan Applications Get Denied"},"content":{"rendered":"\r\n\r\n

It is true that securing a hard money loan takes much less time and requires less paperwork when compared to a traditional bank loan. Nevertheless, there are certain common mistakes and pitfalls that applicants encounter when applying for hard money loans in San Francisco<\/strong><\/a> or elsewhere in California. If you wind up making one of these preventable mistakes, it could mean your loan application gets denied.<\/p>\r\n\r\n\r\n\r\n

Although hard money and private capital lenders such as PB Financial Group are willing to overlook issues such as low credit scores, credit history blemishes, and lack of income history that are major stumbling blocks for bank lenders, we do;however, want assurance that a borrower intends to repay the loan. With this in mind, there are three repayment-related pitfalls that you want to avoid<\/em> when requesting a hard money loan:<\/p>\r\n\r\n\r\n\r\n

  1. You Do Not Have Any Skin in the Transaction<\/h2> It is quite common for hard money lenders in San Francisco<\/strong><\/a> , Los Angeles<\/strong><\/a> , and other parts of California<\/strong><\/a> to see evidence that you have some of your own money invested in the project. Why? Because the lender wants to be sure that you do not have the option to simply throw your hands up and walk away leaving the lender holding the proverbial bag. In many instances, hard money lenders expect an applicant to have 25 percent of the purchase price, either in cash or as equity in other transactions, invested.<\/li>

  2. You Do Not Have the Liquid Necessary to Make Monthly Payments<\/h2> Many hard money loans include specific terms that require interest-only monthly payments for the term of the loan, while the principal of the loan would be due at the end of the term, which typically runs between six months to two years. This is why many hardmoney lenders in Los Angeles, San Francisco, and other localities will still want to see that you have sufficient income or cash reserves to cover the monthly payments stipulated in the hard money loan.<\/li>

  3. You Do Not Have a Realistic Exit Strategy<\/h2> As mentioned earlier, securing hard money loans in San Francisco<\/strong><\/a> or elsewhere in California means you are pursuing a loan that is short in duration with a fairly large balloon payment due at the end of the term. Nevertheless, many hard money lenderswill want to see that you have at least one viable strategy for actually repaying the hard money loan. Here are some examples of common exit strategies cited in hard money loan applications: