What is Loan Documents Software?
Loan Documents Software is a technology tool that helps private and hard money mortgage lenders automate the process of generating a set of legal documents that a property investor (borrower) needs to sign to receive a loan secured by investment real estate. Also known as “loan docs”, these agreements spell out all the terms of the loan, including interest rates, fees, payment schedule, default interest, and much more.
Using a Loan Documents Software system, a lender can fill out a form with all the loan terms, and quickly generate the contracts, disclosures and agreements for the borrower to review and sign electronically. This process is essential to all private mortgage transactions and is commonly known as “loan doc drawing” or “loan doc preparation.”
Stand-Alone Software vs Loan Software Suite
Most Loan Origination Software (LOS) companies offer a suite of multiple programs that private lenders use to run their entire business, including the technology to automatically generate loan docs. These programs keep the entire loan origination process all under one roof. Private Mortgage LOS systems typically include a portal for the borrower to log in and provide a lot of the data that would be included in the loan docs. Having the ability to populate that data into a set of loan docs within the same software platform makes the process very efficient for the lender and the borrower.
Some of the technology providers listed above offer a software system focused solely on loan docs preparation, and we typically list these companies higher on the list. This could be a great solution for private lenders that don’t use a LOS. Several lenders in Private Lender Link’s network have built a custom software solution using Salesforce or Zoho. A stand-alone Loan Documents Software platform could be integrated into one of these custom CRM systems. Some private lending companies use multiple software systems for each part of their business, and a stand-alone Loan Documents Software can be added to the list.
In most cases, these stand-alone Loan Documents Software solutions are operated by law firms that offer legal services related to private mortgage transactions. Some private or hard money loan transactions are very straight-forward and require a template loan doc set. For more complex transactions that require assistance from legal counsel, it could be beneficial to use a software system managed by a law firm so that their attorneys can log in to customize and prepare the loan docs. The need for lawyers to get involved in the loan docs process is most common in commercial real estate finance (CREF), but there are also some residential investment property loans that are very complex. These include:
- Transactions that involve multiple entities
- Loans which are syndicated to multiple investors with fractional interest
- Loans secured by multiple properties
- Loan secured by property in states that have unique lending laws
Why Use a Loan Document Software Platform?
There are several reasons why private hard money lenders should use software to prepare loan docs instead of doing it manually.
Generating loan docs manually, without software, can take a lot of valuable time lenders could instead spend on loan origination. With a Loan Document Software system, a lender can quickly enter the loan term field values and have the loan docs sent off to the borrower in minutes.
Most Loan Documents Software systems provide a form where lenders can type in all the terms which then populate throughout all the pages of the loan doc set. Having a set of form fields ensures that all the information is accurate and properly placed on each document. Lenders that decide to go “old school” and fill out loan docs by hand may run into issues with readability, and misinterpreted information could lead to disputes.
Timing is one of the main reasons that real estate investors use private hard money loans, and a Loan Documents Software system can help private lenders close faster. When a lender decides to move forward with funding a deal, the loan doc drawing process should be very efficient to ensure a timely closing.
Some Common Features of Loan Documents Software
- Importing loan docs from PDF and other file types
- Creating custom templates
- Configuring custom form fields
- Doc Sets for multiple deal types
- Exporting to PDF or Word file
- Electronic Signature
- Security and Encryption
- Access from any device – desktop, laptop, tablet, mobile
- API Integration with CRM or forms software
At Private Lender Link, we provide you with a comprehensive list of Loan Documents Software platforms. Scroll to the top of this page to see the companies listed. View their profiles to learn more about each company and choose the one that best suits your needs. Please mention that you learned about them on Private Lender Link.