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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   October 2016

6 Ways to Speed Up Funding

Transparency and responsiveness work wonders with lenders

6 Ways to Speed Up Funding

Although the steps involved in funding approval are similar for most commercial real estate mortgages, the amount of time it takes to close can vary among loans by weeks, or even months. The fastest route is one in which brokers and lenders communicate clearly and are upfront about potential problems.

The old saw that “time is money” is particularly apropos in mortgage origination. The speed with which a transaction is conducted can have a direct impact on a client’s bottom line.

A quick close means that an investor can begin enjoying sooner the benefits of an appreciating property, or in the case of a refinance, the client can pay off a costly existing mortgage faster and enjoy the interest savings. Speed and simplicity are crucial to the client’s ability to maximize potential profits and other benefits.

Following are some simple strategies that commercial mortgage brokers can follow to ensure financing deals are expedited, allowing their clients to enjoy bigger margins.

1. Follow directions

In the mortgage world, keeping it simple often means following the path laid out for you by your lender. More often than not, that path begins with a checklist provided by the lender detailing items that should be included in the client’s loan-application file.

At times, some items might seem of little value in determining the creditworthiness of a borrower. It is crucial, however, to note that hours have gone into whittling down the list of required items to as few as possible. So, if something has made it to the submission checklist, then it has been deemed an important piece of documentation by your lender. Failing to supply one of these important documents to your lending team wastes precious time.

In addition, with respect to the information that you do provide to the lender, be sure that your clients are as clear, precise and complete as possible. Nothing brings a deal to a halt more quickly than missing, incomplete or incorrect documentation. A fully completed loan submission, however, closes in half the time that it takes to fund a deal that is missing documents upfront. Funding a loan in a matter of a few days is common when dealing with a borrower whose application is thorough and complete. Lenders know the steps required at their institutions better than anyone else, so it will only be beneficial to follow their lead in navigating the lending waters at their company.

2. Spill the beans

Particularly in the hard money space, many borrowers have unique and sometimes complex circumstances surrounding their transactions. To save time, it is always best to divulge, at the start of the process, any unique characteristics that have been communicated to you by the borrower.

That can be difficult, especially in a credit-approval process capable of making even the most qualified borrower feel judged and vulnerable. As a broker, it is natural to want to protect your borrower, but to an underwriter, nothing appears more suspicious than an attempt to mask crucial information that is necessary to the loan decision.

Conversely, the quickest way to earn lenders’ trust is to alert them upfront to any peculiar aspects of your client’s deal, even when it is negative information. Ultimately, that saves time by preventing the lender from going into detective mode to investigate anomalies in the loan file. The back and forth that can result from such an investigation can cost the broker and borrower precious hours and even days in the loan process. Because time is money, full disclosure upfront will pay major dividends in the end.

3. Move quickly

To navigate lending with speed and ease, lenders, brokers and investors must truly work as a team, and the team can move only as fast as its slowest member. So, when a request arrives for additional documentation or for an explanation regarding a discrepancy in the loan-application file, respond quickly and with as much clarity as possible. It can be worrisome to a lender when requests are met with silence. Many lenders deem 24 hours to be a reasonable response time.

The Benefits of having a lending partner that you can
trust and that values you as a broker are immeasurable.

The more quickly you can respond, however, the sooner issues with a loan file can be cleared up. In addition, a quick response communicates to the lender that you deem the deal important and have a sense of urgency about getting the deal funded.

Loan files that are incredibly clean still can take weeks to close if either the broker or the borrower fails to move quickly throughout the process. Make sure someone is always available to answer questions and provide information, regardless of your work or vacation schedules.

4. Communicate special deadlines

Believe it or not, lenders will do whatever they can to accommodate the circumstances of their borrowers. They can ramp up the process, if need be, when a broker or borrower is in a urgent situation.

This might mean prioritizing a transaction ahead of other less time-sensitive loans, especially if this allows a deal to get done in a way that pleases the broker and client. If you are going on vacation, for instance, or your borrower has an expiring contract that cannot be extended, let the lender know about those circumstances, so that your transaction can receive the immediate attention that it needs to close on time.

This extra step in communication can prove to be the difference between getting a loan closed and letting a potentially profitable investment opportunity slip away for one of your clients. It is important to remember that your success is your lender’s success.

5. Ask questions

If at any time during the lending process something becomes unclear for either you or your borrower, seek out answers from those in a position to help. Your lender should always be available to assist when something might not be absolutely clear.

Uncertainty can cause the broker or investor to inaccurately interpret elements of the deal and, in the process, create unnecessary delays. The most important job of a lender is to help brokers and their clients navigate the lending process and clearly understand the terms of the loan the lender is providing.

It also is important to ask questions to minimize the chances of your client encountering any surprises or disappointments. Borrowers should never be in a position of sitting at the closing table and feeling pressured into signing for a loan whose details they do not fully comprehend. Transactions can move quickly, so it is crucial for brokers to ask questions any time that something becomes unclear or uncertain.

6. Repeat the process

Just as there is a certain comfort level with your favorite restaurant or your favorite pair of shoes, there is also an ease that develops between lenders and brokers. Once a broker becomes more comfortable and familiar with a lender’s processes, each successive transaction becomes more seamless.

The first deal with a new lender is always the roughest. As in any business relationship, there is a feeling-out process and a period of getting to know one another. Lenders learn brokers’ preferences and expectations, and brokers become familiar with the loan-approval steps required by the lender. Once you get past this initial period, each successive transaction should get progressively easier and faster.

Foster relationships with lenders that have served you well in the past. The benefits of having a lending partner that you can trust and that values you as a broker are immeasurable.

•  •  • 

Lending is inherently a team endeavor. So, go out there and find a team that works for you and repeatedly delivers. If you follow some basic steps of transparency and responsiveness when working with your next lender, you will be much more likely to find your transactions on the fast track to closing.


 


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