For those engaged in financing a multifamily asset the task of gathering loan documentation, or paperwork, can range from days to months. You can complain the whole way through but this just seems to make the process take even longer.
Stressing over the paperwork is like drinking coffee at midnight when you thought it was decaf- this is not helpful. One strategy I use to shorten the process is preparedness- pre-submission preparedness.
What makes for a viable loan process? First and foremost a timeline. Knowing the anticipated timeline prior to applying allows for some mental preparation for the road ahead. Add to this a lender provided "checklist" and you can visualize yourself in the starting blocks for the run ahead.
The starting gun fires with delivery of the credit application to your loan officer or commercial mortgage broker. We can presume there were some general meetings of the mind at this point; enough that you have determined this is the right course of action. That said, the best thing that you can do for you is not fight them with respect to getting your paperwork in. Protracted loan application processing is often caused by the borrower.
This is a team effort. Removing the "them versus us" perspective is one of the most helpful things to accomplishing the tasks at hand. Hey, if you don't want the money... don't apply for the loan. If you do want the money... do the work- the paperwork.
When the borrower causes the loan process to slow it usually has to do with a lack of organization with respect to providing required documentation; tax returns, financials or entity information that should be readily available. This is counter-productive, of course, as we presume the borrower is applying for a loan because, um, they want a loan. What's the remedy?
Collect most of the lender's "checklist" information prior to submitting the loan application or credit release form
Once the lender is selected and you have their checklist... get to work. When the majority of the information is in your possession THEN sign and send the credit application followed by the requested documentation. There will always be straggler documents, things you are waiting on from someone else.
By requesting these doc's prior to submitting your credit app you can truthfully state they were requested and that they are "in process". The commercial loan process may seem like a high mountain (of paperwork) but like anything else one step at a time gets you closer to accomplishing the tasks.
Complaining about the paperwork gets you no closer to loan closing: providing the paperwork does
Break down the checklist into individual doable pieces. Ask lots of questions, ask for explanations about anything that is not crystal clear in your mind. Stay on pace. As closing day approaches you will have less and less to do. The checklist will be completely "checked"- because you've already done it!
Throughout history people have attempted to buy/sell/finance assets that do not belong to them. Today's world is no different. The documentation required to complete a loan is all necessary in the eyes of the lender. The bottom line is that no money will change hands without proof of title, proof of signing authority, proof of good title. Paperwork, paperwork...
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Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. www.MultifamilyInsight.com