How To Speed Up Loan Processing

The Real Estate Espresso Podcast

How To Speed Up Loan Processing

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How To Speed Up Loan Processing

Welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re talking about how to interact with a lender. If you’re in the game of real estate, chances are you’ve borrowed money.

Lenders come in all shapes and sizes: from the traditional community and regional banks to the larger agency debt sources like Fannie Mae or Freddie Mac. There are also government-sponsored loans from HUD and SBA, plus numerous private options including debt funds, CMBS loans, preferred equity, SEAPACE, and various mezzanine lenders. All these sources have one thing in common — they’re going to go through an underwriting process that will require you to provide documentation about the borrower, the guarantor (if it’s a recourse loan), and the property.

On today’s show, I’m going to share what we believe are the best practices when interacting with lenders, or at the very least, I will share how we manage the process in our development company. The borrowing process involves a lot of back and forth with the lender, but being organized can help a lot to speed things up.

Let’s start with the Commitment Letter or the Term Sheet. These documents specify the conditions of the loan and the documentation the borrower needs to provide. If you’re regularly borrowing for your projects, chances are the requirements will be pretty similar from one lender to the next. Also, consider that the most I’ve seen from a lender was a closing checklist of 150 deliverables — that’s a lot of information to provide and a lot of information for the lender to digest.

Now, let’s say you’ve organized all your files in a directory structure for your company and your project. This includes a title report, property survey, environmental report, appraisal, and possibly a market study. You should organize them in a way that makes sense to you, but you’ll also want to format them following the Term Sheet’s arrangement to speed up the processing.

We always recommend creating a directory named following each term’s order and positioning on the Term Sheet. This way, you eliminate any confusions and make it easier for the loan officer and underwriter to check them off their list. You also want to save valuable time by avoiding resending any misplaced document attachments that might get lost among the hundreds of emails a day lenders get.

For instance, if the company certificate of good standing is the fourth term on the sheet, create a directory named ‘Number 4 Certificate of Good Standing’. Moreover, having a shared spreadsheet that transcribes each deliverable from the Term Sheet and provides a status report for each item will also hugely benefit the process. It allows lenders to easily keep track of what’s been completed, received, and reviewed, serving as a vital checklist.

The whole loan processing requires a tremendous amount of organization. We have dedicated personnel in our company solely for managing the lending files with different projects and responding to lenders’ queries. The ’80-20 rule’ applies here as not all queries will need responses from other principals in the company.

Lenders rarely meet their own forecasted timelines for loan processing. Therefore, doing everything possible to speed up the process on your end is crucial to avoid delaying it further. So remember to stay organized, responsive, and consistent.

Now, go make some great things happen and I’ll talk to you again tomorrow!

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