How to Entice Lenders with a Professional Looking Loan Package
So you’ve decided to shop the mortgage market on your own because you realize you have a higher probability of finding better loan terms than financing your property with your existing lender. The disadvantage is that it will take considerably more time and effort on your part.
In the previous chapter I explained how you go about finding the most competitive lenders to contact. I also discussed the do’s and don’ts of phone etiquette to maximize your chances of getting a lender to ask for more information about your loan proposal.
The next step is to send a preliminary loan package to those lenders who expressed initial interest in financing your property. But what exactly is a lender looking for? To begin with, a lender wants you to answer the question, “Why would I want to put a loan on this property?” The loan package should answer that question as completely as possible.
And maybe just as importantly your loan package should exude professionalism. You would be shocked at how often loan officers receive a sloppy looking loan package that screams out to them, “I take no pride in my work and I’m clueless as to what you’re looking for in a good loan.”
Think about it for a moment. Other than the initial phone call, no other source of communication speaks more clearly as to who you are than your preliminary loan package. If it comes across as being poorly put together what does that infer about you? The property and the loan request may be right down a lender’s strike zone, but if it looks like you don’t know what you’re doing, you’ve significantly reduced your chances of getting the lender’s interest.
Remember this vital piece of advice: Perception is often times more important than reality. You’re asking a lender to lend you lots of money. You better have a package that tells them that you’re worth the risk. If not, you’re wasting your time.
So what should a loan package include? At the very minimum it should include the following documentation:
- A one page executive summary summarizing the loan request.
- A pro forma of income and expenses that can be justified by the historical operating statements
- Two full years plus the current YTD operating history on the property
- A current rent roll
- Photos of the property
BORROWER INFORMATION (on all borrowers with managing control of the ownership entity or 20% or more interest in the property)
- Personal financial statement
- A real estate owned schedule
- Copies of all bank/brokerage statements that verify the liquidity that is shown on the borrower’s personal financial statement
- Two years of personal tax returns
- A brief resume on the owners
Provide a complete preliminary loan package or risk being considered a lightweight.
Once they’ve reviewed your package and hopefully expressed interest in your loan request, the lender should be willing to provide you a letter of interest, or as it is called in the business, an LOI. Fight the urge to accept a loan quote over the phone. A loan quote over the phone is meaningless. Get it in writing. If they aren’t willing to do so, they’re not really interested. Drop them like a hot potato and move on to the next lender. Once you’ve received two or more written loan quotes, the fun begins.