Is your lender always coming back to you for additional information? You need a response quickly, but sometimes it seems like they’re delaying the process or trying to complicate things.
When reviewing an application, we analyze the situation based on the information provided. The more complete an application and supplementary information, the faster we can provide a term sheet or a commitment—especially when loans need to close quickly.
Ultimately, any application should be able to answer the following 3 key questions:
- What is the borrower looking for?
- Why are they coming to us, as opposed to an institutional lender?
- What is the exit strategy?
We are often provided with applications that are incomplete. If the application can effectively tell the story and describe the borrower’s request and circumstances, our underwriting team can move the process forward quickly and provide loan terms or even a commitment, often from a single email.
Here are some tips and tools to quickly and easily tell us your client’s story:
Provide as complete an application as possible for the borrower(s):
- If we have a good understanding of their financial situation, we’ll quickly be able to identify how we can help and what terms we can offer.
- We don’t focus on debt servicing ratios, but loans need to make sense and be suitable for the borrower and the financial information in the application should support this. For instance, it’s unlikely that a dental hygienist making $60,000 would be building a $2 million home, but there may be more to the story that would explain the circumstances, so walk us through it.
- If the borrower is a corporation, provide some background on the company (ownership structure, latest financial statements (even if a couple of years old), is it a holding company or an operating entity, etc.).
Describe the property:
- Property’s characteristics – lot size, building size, location, condition, etc.
- For a purchase, the MLS listing and APS would be helpful.
- If this is a commercial property, do they have a previous environmental report/building condition report? Not all commercial properties require these, but this additional upfront detail improves our ability to understand the file and provide a quick and accurate response.
Tell us the purpose of the loan:
- Is the borrower seeking a 1st mortgage or 2nd mortgage?
- What will the funds be used for? Is it to refinance an existing mortgage, consolidate debt, fund the purchase of a property, or renovate or construct a property?
- If the loan is for construction or renovation, what are the associated costs and how far along is the borrower with their plan? Budgets, drawings, or permits can tell us a lot about the situation.
Explain the exit strategy:
- How is the borrower going to utilize the loan to improve the property and/or their financial situation? Our goal is to provide the best lending solutions to move our borrowers toward refinancing with a financial institution, selling their property, etc. whether by increasing the value of the asset or the income it generates or by improving the borrower’s credit.
- Explain the timeline and whether the borrower will need renewal provisions. Understanding the current situation and the exit plan will help us tailor a loan structure that will work for the client.
We encourage you to use your discretion and professional judgement. Some loans won’t have a complicated story, making the application process and our response very fast and easy. When in doubt, include more detail or call us first. Applications can also be submitted through Velocity/Expert. This is a simpler process for submitting complete applications along with a credit bureau for the borrower.
If you have questions on what to include in a mortgage application, feel free to ask us. We understand the urgency of the situations that brokers and borrowers are dealing with and want to provide solutions as quickly as possible.
Article by Ira Markus, VP of Mortgage and Equity Investments, at Hillmount Capital. Ira can be reached at firstname.lastname@example.org