Underwriting Our Loans: Assets And People

Our underwriting process is both an art and science. We have strict underwriting criteria in which we use each time a borrower applies for a loan with us and we also have to feel in our guts that the deal make sense even after all the numbers fit our underwriting criteria. The biggest mistakes (lessons, growing opportunities) I have made in previous business ventures revolve around stepping over what I knew in my gut felt right and I was hoping the projections would just work out somehow.

At Legacy Capital, we underwrite both the borrower, business and the property. The property is more straightforward to underwrite which we highlight below, it is the borrower that is more complicated. We have yet to make a loan to a borrower without first meeting them in person, typically we have known the borrower for years prior to making a loan to them, and our gut tells us if it is something that makes sense after all the numbers have been crunched.

Here are some things we look at during our underwriting process as we evaluate if this is a deal we want to move forward and make a secured real estate loan:


  • Property Values– using a 3rd party appraisal, we will lend up to 60% Loan To Value (LTV).
  • Preliminary Title Report– Borrower’s title insurance policy equal to amount we’re lending.
  • Current lease agreement(s) for subject property- showing income that the property currently generates
  • Complete and executed Purchase and Sale Agreement- agreement used to purchase subject property
  • Contractor bids- showing the rehab budget and the costs to complete renovations
  • Title Insurance
  • Property Insurance


  • Legacy Capital Residential Loan Application- Our loan application giving us the background story for the deal
  • Schedule of Real Estate Owned- list of all properties owned by borrower personally and by business
  • Authorization to Release Credit Authorization- ability to get check credit
  • Zero Tolerance Fraud Policy
  • Valid Photo ID of all Borrowers
  • Previous Two months of all bank statements- all pages of bank statements, borrower must demonstrate at least 3 mos. of reserves


  • Articles of Incorporation/Certificate of Formation/Articles of Formation
  • Bylaws or Operating Agreement
  • Federal EIN Verification

We have recently chosen to not fund two borrowers and the deals they wanted us to lend on since we did not get a good feeling from the prospective borrowers. The deals made sense on paper, but we did not feel comfortable moving forward with a business relationship with these potential borrowers so we said “no.”

We never lead potential borrowers on and let them know as soon as we have made our decision, but we have to go to sleep at night knowing that our capital and reputation is on the line each time we fund a deal. Our investors trust us to fund real estate deals and real estate borrowers that make sense for the short and long term not just try and make quick money if it is not prudent.

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