How Can I Get a Short-Term Loan for Real Estate?: Full Guide

Wondering, “How can I get a short-term loan for real estate?”  We’ve got the answers. Let’s delve into how the application process works, what it requires, and the qualifications you must meet to get a short-term loan for your property investments.

Main Takeaways

• To get a short-term loan for real estate, you must get your finances sorted out. Then, you can display your business plan, which shows how you will prepare your real estate project to be profitable enough to repay your loan. Next, you must fill out your loan application, which involves basic questions about your background and loan history.
• In the later application stages, your lender will examine your materials to see if they meet their standards. Finally, you will get approved, agree to the terms and conditions, and repay the loan.
• One of the easiest ways to get a short-term loan for real estate is to get an asset-based loan because these loans mainly require you to have a property as collateral to qualify.

How Can I Get a Short-Term Loan?

It can be relatively easy to get a short-term loan for real estate. To really boost your chances, you could opt for an asset-based loan like Baltimore hard money loans.

These are known for having more flexible conditions and quicker approval processes than traditional loans do. After all, the primary qualification needed for these loans is straightforward: you simply have to have a property. Your financial standing matters, for sure, but it’s a secondary concern. As such, you can be approved fairly easily and quickly.

The Application Process, Step-by-Step

You can come prepared for your negotiations with your lender by completing the below approval steps.

Get Your Finances Sorted Out

Your lender will examine your finances to make sure you’ll be able to repay your loan. Should you go with a traditional lender, you might need to attain a credit score in the high 600s. Otherwise, if you choose an asset-based lender, like a hard money lender, you may be able to borrow, and buy a property with, a somewhat lower credit score depending on a number of other factors.

Also, you should have a stable income that ensures you’ll have a high LTV and low DTI ratio, as well as a good repayment history.

Prepare Your Business Proposal

When you apply for a short-term loan, you should have a general idea of how much you want to borrow and why.

Furthermore, you should be prepared with a thorough business plan. By this, we’re referring to your timeline, budget, and estimated profit. Also, you should solidify your points by coming up with all relevant documents, like your needed permits, contractor estimates, and other info.

At the end of the day, your proposal should convey how actionable and profitable your project will be. By doing this, you can hasten your loan approval.

Submit Your Loan Application

At this point, you should finally apply for a short-term loan and send in your papers. This is the moment when you need to stay organized and ensure you’re prepared for any information the lender may ask for.

The information you’ll need to apply for a short-term loan can differ based on which short-term loan company you choose. However, to give you an example, our loan application is straightforward.

As a general practice, you must provide some essential information in your loan application before moving forward. For example, you’ll need to give your name, email, phone number, what you’ll use the loan for, and relevant property addresses.

Additionally, the lender may ask questions such as:

• Is this your primary residence?
• Are you in foreclosure?
• Are you in bankruptcy?
• What is your credit score?

Next, you should lay out the specific loan amount you want, the property’s purchase price, the current value of the property, the estimated value after rehab, and estimated repair costs.

Also, the lender may ask additional questions, such as:

• If getting an asset-based loan, do you have any current loans on the collateral property?
• Have you ever gotten a short-term loan before?
• Do you have any other loans?

Then, when you finally get a short-term loan, you’ll need to provide various documents related to your income and property project plans. Some documents you might need include:

• Copy of your driver’s license
• Sales contract and any deposit checks
• Bank statements showing your finances
• Two years of tax returns
• List of proposed property repairs and costs
• Copies of appraisals or inspection reports
• All corporate documentation
• Addresses of cross-collateral property, if any

Go Through Underwriting and Approval

Now, your lender will examine your application materials.

Next, they’ll consider your project’s odds of success and your ability to pay the loan off. This may include an assessment of your property’s value, its risks, and surrounding market conditions.

If your application matches the lender’s criteria, you’ll be granted conditional approval, which could then go through final underwriting.

Get the Loan Terms and Conditions

Finally, it happened: your loan application has been approved!

Now, you simply must get through the routine formalities. Your lender will give you your loan terms and conditions, like the interest rate, loan amount, fees, and repayment schedule. You should pore over these terms, paragraph by paragraph, completely before agreeing.

Close the Loan

Once you agree to the loan terms, you must sign it and give your lender all relevant documents. Then, without further ado, you can begin using the loan funds for your project.

Complete the Repayment Process

In this step, you need to pay back your loan as outlined in your loan agreement terms. To do this, it’s important to plan and budget your loan payments so that you don’t fail to pay the loan and lose your property collateral.

How to Qualify to Get a Short-Term Loan

You can maximize your ability to get a short-term loan by considering these factors:

Your Credit Score

To get a short-term loan (a traditional bank one), your credit score is often one of the biggest factors impacting your eligibility. Also, it is a relevant factor for alternative short-term loans, like hard money loans, but it’s not the only factor.

For example, traditional lenders require you to have mid-600 numbers. On the other hand, hard money lenders usually look at your score along with other financial factors such as collateral, overall debt, and down payment.

Either way, having a good credit score can boost your chance to get a short-term loan and earn better rates.

Prepare Your Down Payment In Advance

Most loan providers require a sizable down payment for approval. Because of that, if you need a short-term loan quickly, it’s a good idea to gather as much down payment money as you can in advance. To give a ballpark figure, some lenders will request around 10% to 30% of your loan amount as the down payment. Of course, this ranges differently from lender to lender.

As a rule, the more of the payment you get over with now, the lower your interest rates will be later. In that regard, it may be a good idea to provide a higher down payment at the start.

Show You Can Repay Your Loan

Before lenders decide to approve you, they’ll want to be assured you have a clear action plan for your investment. So, as we mentioned before, you should display comprehensive, well-thought-out plans for your property and how you’ll generate enough money to pay back your loan. Even better, the more economically sound your plans are, the better your rates could be.

Have a High-Quality Target Property

In particular, this rule comes into play when you apply for a short-term loan that is asset-based. For these kinds of loans, you can’t get a short-term loan if you don’t have a property asset as collateral. So, make sure you at least have found a possible property to use, one that has profit potential.

Additionally, they will need your eyed property’s value (or expected future value, in the case of repairs) as a gauge to determine the right loan terms and other features.

Typically, asset-based lenders, like hard money lenders, use a property’s expected after-repair value to help determine interest rates and loan terms. So, securing a great property deal is one of the biggest steps to help you get a short-term loan from them.

Possess a Good Debt-to-Income Ratio

Lenders may pass on lending you money if you don’t have a way to repay it. On that note, your lender may ask for proof of income before giving you a loan. Through this, they can be sure your income is sufficient to cover your monthly debt payment—or, in other words, has a good debt-to-income ratio.

To clarify what “proof of income” means, we’re referring to documents like tax returns, pay stubs, W2 forms, and bank statements. By doing this, lenders can more quickly estimate if you’ll be able to pay back your monthly loan.

Show a Good Loan-to-Value Ratio

Typically, lenders place a lot of stock in your loan-to-value (LTV) ratio. Your LTV can serve as the basis of how much risk they might face in lending to you. As the name signifies, the LTV ratio measures how much your property’s value stacks against the loan amount. If your LTV ratio is on the lower side, it shows that your investment will be more risk-proof for your lender.

Need a Short-Term Loan? Get One From MHML

If you need a short-term loan for real estate, you can increase your chances by coming prepared with the necessary materials, like your credit report and other financial materials. Such documents are paramount to securing your loan approval chances.

However, if your financial standing is less than ideal, these requirements may be a tall ask. That’s why asset-based loans, such as hard money loans, exist. They pose an alternative when you want loans with simple, straightforward qualifications, such as having a property as a real estate investor.

Furthermore, hard money loans offer customization and expedited delivery that many other loan types cannot replicate. This is especially critical when you need a short-term loan, and you need it now.

Even better, by choosing a locally owned and operated business like Maryland Hard Money Lenders, you get the benefit of both our expertise and an unparalleled level of attention to detail necessary for buying rental property.

After all, our team has years of experience in the real estate industry. And that’s why understand how urgent your need for a loan is—our funding can be available in mere days – not months, like traditional lenders. Contact us today to jumpstart the approval process ASAP.