Control The Loan Process

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Commercial-Loan-Application

THE OTHER DAY, I was doing some analysis on the loans lodged over the past year … looking at the time-frames, and where the delays have occurred.

And I was struck by the number of stages a loan application needs to go through, before settlement. Plus the number of people the file depends upon, to go smoothly.

The people involved in this process can include the broker, the bank officer, credit analyst, valuer, borrower’s solicitor, bank’s solicitor, vendor’s solicitor, accountant, financial adviser (if financial advice is required), real estate agent and, possibly, the tenant.

As you can appreciate, delays can occur at the hands of any of these stakeholders with dire consequences. That’s why it is advisable (as far as possible) for you to retain as much control over the process as you can … in order to avoid potential pitfalls.

After all, it is you who will suffer the most, if things go awry. And the one to benefit the most, from the process going smoothly.

Whether you are applying directly through a bank (or your broker), the following tips will help ensure your application progress as smoothly as possible.

1. Ensure Your Loan Application is Comprehensive

Credit analysts will review your file based on what is submitted to them. So, it is in your interests to make their job as easy as possible.

You can do this, but ensuring that all items on a loan checklist are presented in a neat format; and any discrepancies (for example, drop in income or defaults) are fully explained.

Your banker (or broker) will be presenting your submission to the credit analysts; and it is important you work with them to present a paper that will be easy to analyse.

Some investors who are borrowing frequently maintain a “finance pack” — consisting of items commonly requested, such as financials and bank statements — a practice that can be very helpful in making the finance process relatively pain-free.

2. Make Sure You are Available

Not in any way wishing to dictate your personal calendar, the period between the purchase date and settlement for the property is certain NOT the ideal time to go on an overseas holiday.

With commercial finance, you will be required to sign documents, and may need to get financial and legal advice in order to do so. And this is extremely difficult to do while on the Inca trail in the Andes, or sunning yourself in the Greek Islands.

3. Have Your Advisers ready to Review any Documents

Depending on your loan structure, you may require legal and financial advice as part of the loan process. Therefore, you should have them on standby to handle this.

4. Take Charge of the Valuation

As you would realise, the valuation is one of the great unknowns of every application. Therefore, it is best to address this early in the application process, in order to prevent any nasty surprises later on.

Most banks will allow you to arrange your own valuation and re-assign it over to the bank, after you submit the loan application.

Having control over the valuation gives you the flexibility to re-use that valuation, if the original bank doesn’t approve the loan for whatever reason.

And it also provides you with a valuable reference, in terms of comparable sales and other information — which you are entitled to, considering you are the one paying for it.

Before arranging a valuation, make sure you engage a valuer on most lenders’ panels; or at least check with the intended sources first.

5. Continually Seek Updates

While it is important to surround yourself with trustworthy professionals, you ought not be shy in asking questions — to fully understanding the loan process.

Gaining this understanding will provide a level of comfort; and also ensure you are kept front of mind, with whomever is handling your file. So, don’t be shy!

Bottom Line: Borrowers who involve themselves with the loan process, and particularly with the above 5 points … have had far better and results. Borrowing money is a very important part of most investor’s strategy; and therefore, it deserves as much attention as choosing the correct property.

Perry

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