There are many reasons why you could have your loan declined by our risk analysts or our private lenders. Here are a few reasons and some tips on what you can do.
Over 50% Loan to Value (LTV)
Our lenders generally do not lend over 50% LTV due to the risk involved. In fact, a loan at 50% LTV is considered borderline.
Why is this? Unlike with other private mortgage lenders, the lenders we work with are not in any way interested in foreclosing on your property. They consider foreclosure to be the worst case scenario when all other options have been exhausted. If they have to foreclose, the costs and delays add up. Their funds are tied up — not earning any interest — until the process is over. As a result, they stay away from loans where the risk of foreclosure is high.
Remember that your self-reported valuation of the property many not match our internal valuation when we receive your loan application. We perform an initial analysis based on property values in the area. The goal is to reach a “quick sale” valuation of the property to use as reference.
If the requested loan amount results in having your loan declined, please review the amount that you need. Also, some of our prospective borrowers have multiple properties and have added more collateral to approve a loan. We will always consider revisions.
Our lenders prefer loans in the Central Valley (Gran Área Metropolitana – GAM) as well as attractive tourism areas such as Jacó, Manuel Antonio, and Guanacaste beaches.
This is because they do not want to foreclose and own your property. As such, they prefer to lend on properties with more liquidity (quicker sale potential) in places that they know and understand the market.
Often times in our initial analysis we find issues on the property’s title such as pending foreclosures, liens, or lawsuits. In a few occasions, the details of the title or land survey have been questionable.
If you cannot address these issues adequately, we will reject your loan application. Lenders want as few unknowns as possible before they part with their money. Please address the issues or be able to show how they can be addressed (with documentary proof) prior to closing, or at closing.
Site Visit Issues
When our risk analyst determines that a prospective loan is worth seeing, we schedule a site visit with you at the property. This visit is to view it in person and assess the loan’s viability to our lenders, as well as to get to know you.
In some cases this is where you could have your loan declined. This can happen because the photos you provide aren’t accurate, the location is unsuitable, or there are obvious issues in person that were not made clear during the initial evaluation of your loan application.
The appearance and cleanliness of your home or property is of vital importance in determining whether a loan will be presented to our private lenders. Remember that we are selling the potential lender the loan just as you would if it were a direct sale. You only get one chance at a first impression!
Our lenders only offer first mortgages, not second mortgages. That being said, if there is already a mortgage on the property, most of our lenders are open to financing that would include paying off that mortgage, provided it meets the rest of the requirements.
Raw Land – No Significant Construction
Dirt doesn’t earn. Our lenders do not lend on raw land, even if it’s for a construction loan where the loan is assessed on Future Value (value of the property after the construction is complete).
There are a few very rare exceptions to this, for example when the location is ultra desirable and the Loan to Value is very low (think under 20% of our assessment of the land value).