You’re Approved for a Hard Money Loan. Now What?

We’ve talked a lot about what it takes to get approved for a hard money loan and how our hard money programs work. So hurray! You’ve read our blog, completed our detailed application, and talked to our underwriters. You are now pre-approved for a hard money loan. What does pre-approved mean, and what are the next steps? Perhaps even more importantly, how can you leverage this pre-approval to make money in real estate?

Let’s start from the beginning. If you are like the majority of our borrowers, you’ve probably decided to get pre-approved before running out the door to shop for an investment property. That makes complete sense because you needed to know two critical things. First of all, is a hard money loan with New Funding Resources right for you? Secondly, what is your real estate investing budget?

As part of the pre-approval process, we exchanged information about each other. Our underwriters learned about your credit, your previous real estate investment ventures, and your current financial situation. You’ve also learned about New Funding Resources, how we are different from other lenders, our programs, terms, and interest rates.

If there is a good fit between us, our underwriters have pre-approved you to purchase an investment property within a specific price range. Being pre-approved for a hard money loan means you can start proactively looking for promising real estate opportunities. Such opportunities typically come in the form and shape of poorly maintained homes with the potential to fetch a much better price after you rehab them. They are challenging to find, but with the right strategies and determination, you will come across them.

How to leverage being pre-approved for a hard money loan

Ensure Your Realtor Knows You Are a Cash Buyer

First, make absolutely sure that your realtor knows you are working with a private lender like New Funding Resources. Our loans can be closed within days, and because of this, they are considered a cash offer. Yes, being pre-approved for a hard money loan with us means you are an all-cash investor. Cash offers are essential when competing against other investors. They are also important when working with sellers under time pressure. Most real estate agents are familiar with how private lending works, but some might not. If they are not, have them call us, and we will fill them in.

Laser Focus Your Effors by Staying with Your Budget

There are no reasons to waste time looking at and evaluating properties you cannot afford. Similarly, you might miss investment opportunities if you are unaware you can afford them. The reason to get pre-qualified for a hard money loan, is to know your budget. As a real estate investor, your budget includes the maximum purchase price and the maximum rehab budget. Your budget is driven by how much money you are willing to invest in real estate. The more money you have, the more expensive the project you can afford. Knowing how much you are pre-approved for can help you to laser focus your marketing efforts. 

Negotiate Well by Customizing Your Proof of Funds Letter

Once you find a property you are interested in, it’s time to make an offer. We recommend using a custom proof of funds letter that states the price you are willing to offer as the maximum amount of funds available to you. Referencing that price specifically helps reassure the seller that you have the funds needed and helps you, the buyer, keep the price from escalating.

The truth is that many of your offers will be rejected. That’s all right—please don’t get discouraged. You aren’t looking to pay top dollar; you are looking for an investment opportunity that will make you money. Stay cool and number-oriented. Use our hard money calculator to see how much profit the transaction generates. If your profit falls below your comfort level, let it go and move on to the next deal. 

Manage Risk By Runnning Your Deal by Your Hard Money Lender.

If you are new to real estate investing or have not worked with us before, feel free to call us before making an offer. Let’s discuss each deal to ensure it fits your and our risk appetite. Are there any red flags associated with the investment property? Is it meeting your profit expectations? Is your after-repair value well-supported by comps? Is your rehab budget realistic? Getting clarity on these and many other questions will help you maximize your profits and minimize your risk.