When you’re an active participant in the real estate investing world, there are times when securing the right type of financing at the right time can make all the difference in the world. Whether you’re doing fix-and-flip projects, buying rental properties, or conducting a larger commercial project, there will generally come times when real estate hard money loans are likely to be discussed.
But what happens when someone wants to show what their source of financing will be or that they are in a funding process now? You need a funds verification letter. Click here for a better understanding of what the loan is.
Hard Money Funds Verification Letter: What It Is
A hard money funds verification letter is an official document typically delivered by a lender, often a private lender or hard money lender, which will verify the borrower’s access to capital for a real estate transaction. Hard loans differ from more traditional bank loans in that they are generally much shorter in nature and are often secured by the value of the real estate being purchased.
This letter is to help verify the source of the financial capability that’s required. When used properly, this can be a valuable document when dealing with sellers, lenders, or other 3rd parties in the transaction. It helps show that the borrower is a strong buyer and has created the means to purchase the property and can help move things along faster.
Why Do You Need a Funds Verification Letter?
There are several reasons someone may want to use a hard money funds verification letter for their real estate endeavors:
1. Shows You’re a Serious Buyer
The biggest challenge that often comes into play is when working a real estate deal, especially with some competition. It’s hard to prove to a seller that you have a buyer and the financial resources to close. A real estate hard money funds verification letter can greatly assist in helping a seller see they have a potential buyer. This alone is often enough to catch a seller’s eye.
2. Speeds Up the Closing Process
Real estate deals can take some time to close, especially with traditional financing alone. Hard money loans are a bit quicker. Yet, the thing with closing these deals is that it’s hard to physically see that somebody has the money if it hasn’t been deposited. A hard money fund verification document can show that funds are available to other parties in the transaction.
3.Helps Build Trust with Lenders
When applying to work with hard money lenders, this type of letter can function as an “advance” type of letter. It will show lenders your willingness and capability of proceeding with a transaction. This is the type of commitment that a lender would greatly appreciate.
4. Don’t Have Last-Minute Surprises
The last thing anyone buying or selling real estate wants is a big surprise. If you don’t have this type of letter early in the process, it could result in a deal falling through if a lender ends up not providing the money when it’s needed. It eliminates the guessing game and gives everyone a clear idea of where the funding stands.
What’s Included in a Hard Money Funds Verification Letter?
Lender Information: This includes the lender’s name and contact information. Always double-check to make sure the company is a reputable entity or individual within the industry known for providing these loans.
Loan Amount: The letter will show how much money the borrower is eligible for. This, in turn, provides a clear picture of how much the borrower has access to for the transaction.
Loan Terms: This provides the basic structure of the loan, including the interest rate, repayment period, and any other pertinent details of how the loan will be executed.
Property Information: The letter may also include information about the property being purchased or invested in. This shows the lender what properties are being discussed and gives them peace of mind the property is adequate collateral for the loan.
Verification of Funds Availability: This shows the funds are available for immediate use and there are no issues holding up the process. This provides the seller, or others involved with the deal, peace of mind knowing the funds will be taken care of without hold-ups.
Expiration Date: A loan expiration date – when the offer is no longer available – might be included as well. The terms are only good for a set period, giving borrowers a time frame to act. To understand the importance of this document, check out this resource: https://www.talimarfinancial.com/.
Hard Money Loan Process: Working Process
These loans are often used when traditional financing is off the table, such as times when taking out a bank loan or mortgage is unlikely to happen. Here’s a general overview of what to expect when applying for this type of loan:
The Loan Request: All loans start with a request. It is the process of outlining what you are looking to accomplish with the loan and what you are looking for in a lender.
Loan Approval: Once your application has been reviewed, if the lender agrees, they’ll approve your loan based on the property you’re buying, rather than your own credit or history – which is why hard money loans are so valuable for those with subpar financial standings.
Verification Letter: Upon approval, you’ll be given the hard money funds verification letter. This document acts as official proof that you have access to the necessary funds to close your deal.
Closing: With this letter in hand, you can then proceed to the closing process, likely moving faster than through traditional means.
Hard Money Funds Verification Letter: Securing One
So if you’re looking to get a real estate hard money loan and need a verification letter, what steps should you take?
Find a Hard Money Lender: There are countless private lenders who work with hard money loans. Simply look up reputable lenders either near you or online. Do your research before making a choice.
Submit Your Application: Once you’ve found a lender that fits your needs, it’s time to apply. This process is fast and easy, since the primary focus of the loans tends to be on the value of the property, as opposed to your credit score. Click here to find out what documents you need to qualify.
Get Approved: If your lender agrees, they’ll approve your loan, provide you with the letter. Then, they can confirm you have the proper funds to finalize the deal.
Proceed with Your Deal: You can present it to your seller, fellow investors, or anyone else involved in the deal, giving them formal proof that you have your financing in place.
Conclusion
A hard money funds verification letter is an invaluable tool for real estate investors hoping to close on financing quick and easy. It gives you proof of financing while also helping you establish trust with your lender and seller.
It also prevents any unnecessary hold-ups in the future. Whether you’re flipping homes, investing in rentals, or planning a large commercial project, a verification letter will give you the confidence you need to move forward.
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