There is a huge misunderstanding by clients when they call thinking they can get a hard money loan just because they have equity. Sure, hard money lenders are mainly equity based lenders and lend base on the collateral’s equity position. The more equity the collateral has, the more the lender is protected, but that doesn’t mean money is lent solely based on equity. There are other factors considered before money is lent:
ONE
Does the client have the ability to repay the loan? There are many ways we verify this and it doesn’t necessarily follow the conventional lenders’ guidelines of debt to income ratio and IRS tax verification of tax returns. We look at the big picture. As an example, we know most self-employed clients write off as much as they can to save on their tax liabilities. When we see a client owning a profitable business and showing hundreds of thousands of dollars in income year after year and their payments paid on time (specifically mortgage payments), this tells us the client has the ability to repay. Or when we see 12 months of clients’ bank statements that show an average of positive net deposits, this shows us their ability to repay.
TWO
Client’s character is another huge factor in lending money. We look at the reason for the cash. Their ability to repay. Their pride of ownership with the collateral and their overall credit history. Many times, clients have legitimate reasons for their bad credit history. I read their letters of explanation to make the decision to lend and many times, medical reasons are the culprit. But if we encounter a client whose home looks to be neglected or a client who has back child support payments, shy of a very good explanation, we decline the loan.
THREE
The exit strategy is also important to us. Since most hard money loans are balloon loans, we need to make sure our clients are able to pay us off when the balloon note comes due. Because of this, Evoque Lending provides free credit repair for all of our clients who fund a loan with us. This gives them the opportunity to clean up their credit. This implementation allows us to monitor their overall credit situation and to give them the opportunity to refinance into a new, long term loan.
At Evoque Lending we pride ourselves in lending money to California property owners who are ignored by banks and other financial institutions because of their credit blemishes. At Evoque Lending, we give every loan request the respect it deserves.