Equity-First Private Lending Screen
Screen private loans by collateral equity before conventional borrower metrics
- Difficulty
- Moderate
- Time to result
- ~days to results
- Steps
- 5
- Confidence
- 96%
The screen begins with the asset rather than a conventional checklist of tax returns, bank statements, employment, and minimum credit scores. Establish the property's appraised value, total the debt already secured against it, add the requested loan, and divide that combined debt by the value. Compare the result with the lender's current loan-to-value ceiling, which Boulter says can move with the economy and investor confidence. At the time of the interview, Val-Chris was operating at about 65% loan-to-value, although it had previously reached 80%. Passing this equity test gets a borrower most of the way to a decision; the lender can then issue a rapid indication of feasibility and terms from limited initial information.
Origin
Extracted from Coffeez for Closers, where Chris L. Boulter described Val-Chris Investments' equity-led underwriting approach.
Core principles
- 01Treat sufficient property equity as the primary underwriting signal
- 02Assess the combined debt against the appraised property value
- 03Keep loan-to-value limits responsive to market and investor confidence
- 04Use flexible underwriting to serve borrowers outside conventional criteria
How to run it
- 1
Collect the minimum deal facts
Start with the property address, the amount requested, and the intended use of the money. Boulter says this limited information is enough to begin forming a quote.
Pro tip Keep the initial screen lightweight so a broker can get an answer quickly.
- 2
Establish collateral value
Determine the property's appraised value. This is the denominator for the equity-based decision.
Watch out Do not assess leverage without a supportable property value.
- 3
Total secured debt
Add the debt already on the property to the proposed private loan. The combined figure, not merely the new advance, drives the screen.
Watch out Ignoring an existing first mortgage understates the true leverage.
- 4
Calculate combined loan-to-value
Divide the combined secured debt by the appraised value. Compare that percentage with the lender's current limit.
Pro tip Treat the ceiling as a current risk setting rather than a permanent number.
- 5
Apply the equity decision
If the combined loan-to-value is within the current limit, advance the case toward terms and closing. If it exceeds the limit, the core equity criterion has not been met.
Pro tip Give brokers a dependable preliminary answer within hours when the facts are sufficient.
In the wild
Boulter describes adding the debt already on a property to the additional loan requested. If that total is no more than 65% of the appraised value under the firm's then-current policy, he says there is a good chance the firm can help.
→ The borrower clears the primary equity screen and can proceed toward a quote.
A dentist wanted an additional half-million dollars to expand a dental practice. Boulter contrasted a private loan that could be underwritten in weeks with an SBA process that might take three to six months.
→ The borrower could choose faster capital at a somewhat higher rate and cost.
Common mistakes
Using conventional criteria as the first gate
Requiring bank statements, tax returns, employment, or a minimum credit score defeats the flexibility of the equity-led screen Boulter describes.
Calculating LTV on the new loan alone
The relevant amount is existing property debt plus the additional requested loan, measured against appraised value.
Treating the LTV ceiling as fixed
Boulter says the firm's loan-to-value limits fluctuate with the economy and investor confidence.
Is it for you?
Best for
It is best for short-term, asset-backed borrowing where a property has substantial equity.
Not ideal for
It is not ideal for properties whose combined existing and proposed debt exceeds the lender's current loan-to-value limit.
From the transcript
“we're focused primarily on at that time we were only focused on loan to value”
“if you meet our loan to value requirement you're 90% to the Finish Line”
“if you add up the debt on the property right now and the additional loan you want add those together if they're not more than…”
From the episode
What is Private Money Lending? ft. Chris L. Boulter
Chris L. Boulter