The best time to catch a problem in a private mortgage is before the money goes out the door. Here is a practical pre-funding checklist experienced lenders run on every deal.
- Value and appraisal
Is there a current, credible appraisal from a qualified appraiser and is it a final report addressed for lending use, not a draft? Be wary of optimistic values and confirm the appraiser knows the local market. Your entire LTV calculation rests on this number. - LTV and position
Recalculate the LTV yourself using total debt against the appraised value, and confirm your position (first or second) and what ranks ahead of you. Make sure both sit inside your criteria. - Title
Obtain a current title search. Confirm registered ownership and look for existing charges, liens, judgments, or anything that affects your security for example, a Certificate of Pending Litigation. Unresolved title issues should be cleared (with registered discharge documents) as a condition of funding. - Borrower strength
Review credit, income or asset documentation, and the borrower’s overall situation. You’re not necessarily looking for bank-perfect many private borrowers are strong people with a timing or documentation gap but you want to understand who you’re lending to and why they’re borrowing privately. - Exit strategy
How does this loan get repaid sale, refinance, or take-out and is that plan realistic within the term? A loan with no clear exit is a renewal problem waiting to happen. - Property and marketability
How saleable is the property if it came to that, and how long would it take in a normal (and a slow) market? Liquidity is part of your safety. - Security and documentation
Confirm any additional security, guarantees, and that the mortgage and supporting documents are properly prepared and registered. - Administration plan
Decide before funding how the loan will be serviced payments, trust handling, reporting, and what happens if a payment is missed.
Run consistently, this checklist is the difference between lending on a story and lending on facts.
AAREA’s role
We do this diligence on every deal we present, and administer the loan to the same standard once funded so the rigor doesn’t stop at closing. Tell us your criteria and we’ll bring you opportunities that have already been through the checklist.