Ask Cornerstone: Why won’t hard money lenders give me a proof of funds letter without 30% in the bank?

Proof of Funds

I want to start making offers on properties to flip.  I’m having a problem because hard money lenders won’t give me a proof of funds letter without at least 30% of the loan in the bank simvastatin generic.  I don’t have this money in the bank now, but I can get it because I have partners standing by who will join me once I have a deal.  But I can’t present them a deal, because I can’t make any offers, because I don’t have proof of funds! It’s a vicious circle.

 If I were a hard money lender, I’d be giving out Proof of Fund letters to anybody who would take one. I just don’t understand this: If the loan is based on the equity of the property, couldn’t they just end up decline the loan app after the offer is made?

The lenders see it this way: If they give you proof of funds and you can’t buy the property, why would a lender give you the letter?  You need to show them that you’d be able to buy the property. In order for a lender to give you proof of funds, you have to sign a loan agreement.  If you buy that property, you’ll have to take the loan from that lender with the terms you agreed on.

Here’s a way to end the catch 22 circle.  Approach your potential partners with a business plan.  The financials of the plan would be based on 3 scenarios (pessimistic, realistic, and optimistic projects), would highlight your experience, and outline responsibilities and how profits would be shared. Create a partnernership agreement.  When you’ve identified a property on which you want to make an offer, your partner will be the one showing the proof of funds.

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