Stomping Mad at Your Lender? You are Not Alone!

 

Biggest Borrower Complaints and How to Avoid Them

By: the i Fund Cities Team

 

Let’s face it—working with real estate lenders sucks. And sometimes, it really sucks.

“Wait! Don’t you offer funding for real estate investors?” you ask.

Yes! We do. But we are also investors, and so we know how tough it is to work with lenders. (In fact, providing faster, easier, and more transparent funding for real estate investors is why our co-founders started our alternative lending company, i Fund Cities.)

From lengthy timelines to complicated paperwork and misleading marketing by some companies, investors seeking real estate funding have plenty to complain about.

Let’s talk about three common complaints people have about their lenders, and what you can do about them.

Problem #1: Speed to Close

When getting funds for real estate deals, timing is everything. So, it’s no surprise that one major complaint investors have about their lenders is how long it takes to get the funds.

How long should it take? Well, that depends. Are you using a bank loan, alternative funding, or hard money?

Bank loans are easy to pick on because there is so much red tape. Getting the funds for your real estate deal usually takes about six to eight weeks, but it can take up to two months, depending on the size of the deal. That is an incredibly long time when you are waiting to get a deal done.

Alternative platforms (like i Fund Cities) sit in between banks and hard money on the spectrum of real estate funding options. Alternative loans are a lot faster than bank loans, taking seven to fourteen days to get a loan all the way through the process.

Hard money is the fastest of the group. In fact, they can get you funds within 24 hours, if needed.

Problem #2: Underwriting

Once again, let's pick on banks. For underwriting, banks will ask for everything under the sun, from tax returns, to credit and background checks, and an appraisal, along with an extensive list of other items. You had better get organized if you choose to go through a bank for your real estate funding. They are going to check and double-check you and will practically require a full anal probe to make sure you have it all together (ok, we are joking about the probe, but you get the idea).

Alternative lenders (like i Fund Cities) are not a “no-doc” shop, but they are also not going to probe you with everything under the sun. At i Fund Cities, for example, we look at basic things like your real estate experience, property details, purchase price, rehab budget, after repair value (ARV), and borrower liquidity (not tax returns).

Alternative lenders also ask for an appraisal but be aware that there is one significant difference between these types of lenders that can have a major impact on your deal. Companies like ours use local appraisers. This gives the borrower a major advantage over lenders using large, national, appraisal management companies, which can slow down the process and reduce the appraisal quality.

Hard money loans require little underwriting documentation, as they are based solely on the asset, BUT you are going to pay a pretty penny for this speed due to increased risk.

Problem #3: False Advertising

The complaint of false advertising applies across the board to all types of funding for real estate investors.

The industry is littered with claims like, "We'll lend you 90% of the cost of your project," or "We'll give you 100% financing."

You, the borrower, get excited. “Great,” you say, “I’m going to do real estate with no money out of my pocket!” You click on the link and spend your precious time going through an underwriting process. Afterwards, you find the loan rates and terms are altogether different.

What happened?

The truth is that it is extremely difficult to provide rates and terms to an investor before their deal has been reviewed. Lenders knowingly advertise inaccurate rates and terms to get your attention. But, when they do not deliver, it is costly. Either you do not close, or you look bad to your real estate agent and investors, or you must scramble to get other investors on board to close your deal. Regardless, it is a terrible experience.

Getting a Loan Can Suck (A Lot) Less 

As an investor, who now provides funding for real estate investors, I know first-hand that neither of us have the time (nor the money) to play games.

The bottom line is that the lender you choose for your real estate funding should be able to give you the timeline of your loan and what information they need from you.

Once they understand your project, experience and (except for in the case of hard money), some specifics of your financial situation, they should then be able to provide you with accurate terms for your loan.

The best way to avoid having any of these three common complaints about your lender is to understand how lenders’ criteria differ before you approach a loan provider. Once you choose your lender, do not accept anything less than a transparent, upfront process for your real estate funding.

We understand that working with lenders sucks. But, understanding these issues when going into your loan process can help make your experience suck a lot less!

Keep rocking it Investor Nation!

The i Fund Cities Team