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3 Reasons A Bank May Turn Down Your Loan Request

For many real estate investors, banks are the most common and reliable sources for project funding.

The process is simple—you choose a bank; submit your loan application along with necessary documentation and then wait for an approval. Sounds pretty straightforward, right?

While you may personally know people who got loan approvals within a month, it’s not the same case across each loan application. In fact, you could be sitting months in anticipation only to be rejected in the end.

But knowing the fact that banks have certain criterion and there are regulatory bodies in place to enforce that criterion, rejections are inevitable for some people.

From poor or low credit score to lack of real estate experience, here is why a bank may turn down a real estate investor’s loan request:

Poor Credit Score

Whether you need a bank loan for a real estate project or to purchase a home, traditional lenders and banks check an applicant’s personal credit score and history before offering funding.

The fact is that an applicant’s credit score reflects their financial worthiness and their ability to repay the loan. Therefore, banks consider your personal and business credit score when evaluating your loan request.

If you have a low or poor credit score, there is a significant chance that your loan request will be denied.

Insufficient Monthly Business Revenue

In order to successfully pursue a bank loan, you need to demonstrate to the bank that you are making sufficient revenue every month. High monthly revenue assures banks that you have the funds to repay the loan.

Lack of Business Experience

In many cases, an applicant’s lack of business experience can hurt their chances of getting the bank loan.

In case you are starting out in the real estate business, your loan request is likely to get rejected.

What To Do If Your Bank Loan Application is Rejected ..  

Since the housing crisis of 2008, banks and traditional lenders have become stricter with lending. Therefore, startups or small real estate businesses fail to meet the eligibility requirements of bank loans.

If you’ve failed to qualify for a bank loan, the good news is that you can apply for a hard money loan.

As a short-term alternative loan product, hard money loans are offered by private or non-institutional lenders. While obtaining hard money loan is much easier than a bank loan, you may be charged with excessively high interest rates.

However, collaborating with the right private lender, such as Harper Financial, can help you get a hard money loan at the most favorable rate.

Harper Financial provides a range of alternative loans to real estate investors across the country. Our products include hard money, fix and flip, bridge loans, foreclosure workouts, partner buyouts, reaffirmed mortgages, non-reaffirmed mortgages, bankruptcy trustee payoffs and more.