4 Reasons Why Your Loan Is Not Getting Approved
Having trouble getting approved for a real estate loan? Don’t worry–you’re not alone. There are plenty of reasons you may be getting denied a loan. However, that doesn’t mean there’s nothing you can do about it. Today, we’re discussing four reasons why your loan is not getting approved, common qualifications to consider, and how to improve your chances of getting a hard money loan.
Contents of This Article:
- 4 Reasons Why Your Loan Is Not Getting Approved
- Common Hard Money Loan Qualifications
- How to Improve Your Chances of Getting a Loan
- Find the Right Lender for Your Maryland Property
4 Reasons Why Your Loan Is Not Getting Approved
Being in a situation where your loan is not getting approved can be frustrating. However, it’s essential to know why you’re being denied so you know how to increase your chances of being approved. Here are four of the main reasons Maryland hard money lenders may be denying your hard money loan.
- Property Doesn’t Meet Lending Criteria
- Unrealistic After-Repair Value (ARV)
- No Clear Exit Strategy
- Lack of Experience or Bad Track Record
Property Doesn’t Meet Lending Criteria
Hard money lenders heavily consider the property you’re looking to finance. In fact, they base approval primarily on the value and condition of the property. So, your loan may get denied if it’s in poor shape, located in a risky area, or doesn’t have strong resale value. After all, lenders need to know that the asset can be sold or refinanced so you can pay off the loan in time.
Unrealistic After-Repair Value (ARV)
Your after-repair value (ARV) plays a huge role in determining loan terms and approval. For instance, lenders may think the deal is too risky if your numbers are way off or not backed by comparable sales. That said, supporting your ARV with recent, relevant comps and a solid renovation plan for the property is crucial.
No Clear Exit Strategy
If your loan is not getting approved, take a look at your exit strategy. Hard money loans are short-term, so lenders need to see how you plan to repay the loan. Whether that’s through a fix-and-flip, sale, or refinance, it’s important to have a clear, well-thought-out exit plan. With that, an unrealistic or poorly planned exit strategy raises red flags for lenders, and they may not approve your loan.
Lack of Experience or Bad Track Record
While some lenders work with beginners, others see a lack of experience as a red flag. Additionally, lenders will be hesitant to fund another investment property if you have a history of failed projects. They want to know that you can successfully manage the renovation process and sell the property. If you’re new to investing, you may want to consider partnering with an experienced investor to build credibility.
Common Hard Money Loan Qualifications
Getting approved for a hard money loan is generally faster and easier than being approved for a traditional mortgage loan. However, there are still a few key qualifications that borrowers must meet. Here are some of the most common hard money loan criteria that hard money lenders look for in a borrower.
- Most lenders require a significant down payment or at least 20 to 30% equity to compensate for some of the risk.
- The property must be in a good location with investment potential.
- Borrowers need a clear plan to repay the loan, whether that’s selling or refinancing the property.
- Lenders expect to see realistic after-repair values (ARV) that are supported by comps and a detailed budget.
- Having a history of successful projects can help, but new investors can easily build credibility with strong planning or partnering with experienced investors.
How to Improve Your Chances of Getting a Loan
If you’re trying to finance a property but your loan is not getting approved, don’t give up. There are several things you can do to improve your chances of getting a loan. Here are some things you can do to strengthen your application and boost your chances of approval.
- Choose the Right Property- Look for properties in strong markets with good resale value or rental potential to make your deal more attractive to lenders.
- Bring a Large Down Payment- A bigger down payment reduces the lender’s risk and shows you’re financially committed to the project.
- Have a Strong Exit Strategy- You’ll want to clearly explain how to repay the loan with realistic timelines.
- Provide Accurate Repair Estimates- Submit a detailed and reasonable repair budget supported by contractor quotes and comparable renovations.
- Highlight Your Experience- You’ll want to showcase any past real estate projects or team up with experienced partners to reduce risk for the lender.
Find the Right Lender for Your Maryland Property
If your loan is not getting approved, it may be time to reevaluate your investment strategy and work with a lender who understands your goals. By choosing the right property, offering a solid down payment, and presenting a clear exit strategy, you can improve your chances of getting approved.
Need a hard money loan for an investment property in Maryland? Look no further than Maryland Hard Money Lenders. Our team of real estate loan professionals can help you secure your next property quickly and efficiently. Learn more about our lending process or fill out our initial loan application today!
