Loan purpose is paramount : Business vs Consumer :
• Purpose of loan proceeds written by the borrower . The primary distinction is the difference between consumer and commercial business purposes . Consumer purpose falls under Federal consumer laws ( TruthinlendingTILA ), reflecting different underwriting and licensing requirements .
• Business purpose loans are loans made on 1 to 4 residential units where the loan proceeds are used primarily for business purposes . “ Primarily used for business ” is essential . That means that a portion of the loan proceeds , more than 50 %, must be used for business purposes . A percentage of the loan proceeds ( less than 50 %) may be for consumer purposes .
• A consumerpurpose loan is where “ loan proceeds are used primarily for personal , family , and household purposes ,” more than 50 %.
• A borrower may obtain a loan where the loan proceeds are used primarily for business but use a smaller portion of the proceeds for consumer purposes and still comply with TILA .
Setting up a professional summary to be sent to a prospective lender :
• Your role as the procuring broker is to answer all questions and concerns about the proposed transaction and present all material facts known in a written format called an “ executive loan summary .”
• Name of the procuring broker and the desired fee .
• The description of the property , condition , income , value .
• The exhibit flow should include
pictures , a location map , and a property description .
• Express the positive attributes of the loan transaction .
• Secondly , describe any weaknesses .
• If there are more than 5 or 6 exhibits ,
A consumerpurpose loan is where “ loan proceeds are used primarily for personal , family , and household purposes ,” more than 50 %. then send two or three emails with the exhibits . In most cases , there is insufficient computer memory to transfer large amounts of data unless you use a program like LockBox .
• Email your executive summary of all your exhibits to the lender and follow up two days or so later .
• Expect questions and obtain information for the lender to make an informed decision .
What real estate types are appropriate for private money borrowing ?
• Singlefamily owneroccupied and nonowner occupied .
• Apartments , office , retail , industrial , ministorage .
• Special purpose , such as in restaurants and automotiverelated .
• Land loans .
• Some , like rural land , dirt roads , and being environmentally challenged , are much more difficult .
I hope you find value in the article .
Thank you ,
Dan Harkey
Educator & Private Money Finance Consultant 9495338315 www . danharkey . com
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