Lender underwriting isn’t a black box; it’s a pattern-recognition exercise. Underwriters are paid to say “yes” when the story is credible and the numbers defend the yes. Your job is to make that story obvious. This guide breaks down the internal scorecard most private lenders use (explicitly or implicitly) and shows you how to package your file so the “approve” path feels natural.
The Five Pillars (A Practical Scorecard)
- Experience (0–25 pts): Prior flips or rentals, contractor management, on-time exits.
- Liquidity & Reserves (0–25 pts): Cash to float draws (flips) or 6–12 months PITIA (rentals/DSCR).
- Credit Profile (0–15 pts): Trend, depth, and recency of lates/collections; utilization.
- Collateral & ARV Credibility (0–25 pts): Comps quality, scope realism, condition risk.
- Exit Strategy (0–10 pts): A believable, well-documented sale or refi plan with cushion.
Stronger files land ≥70. Under 60 triggers pricing hits, lower leverage, or extra reserves.
Experience: Show You Can Execute
- Provide a one-pager of recent projects with photos, timelines, and exits (sold price or DSCR refi terms).
- No track record? Partner with a GC or co-borrower and include their resume and past permits/inspections.
- Demonstrate process: weekly check-ins, milestone-based payments, retainage, and contingency discipline.
Liquidity & Reserves: The Trust Signal
- Flips: Bank/brokerage statements covering 2–3 weeks of float between draws; note vendor terms.
- DSCR: 6–12 months PITIA; add reserves for 2–4 units or seasonal STRs.
- Co-mingled funds? Provide clean proof and short letter of explanation for large, recent transfers.
Credit: Pricing Lever, Not Always a Stop Sign
- Key tiers: 660 / 680 / 700 / 720+. Recent lates & high utilization hurt leverage.
- Keep explanations short and factual. Over-explaining reads as defensive.
Collateral & ARV: Where Files Win or Die
- Comps: Renovated, proximate, similar GLA/bed-bath; adjust for finish level and condition.
- Scope: Line items with units (LF, SF, counts), vendor quotes, and a 10–20% contingency.
- Condition risks: If foundation/roof/MEP risk exists, address it up front with bids and sequencing.
Exit Strategy: Make It Believable
- Fix & Flip exit: DOM analysis, price band table, staged photos plan, and price-reduction trigger.
- DSCR refi: Rent comps, signed leases, correct insurance class, and DSCR math with cushion; note IO option.
Packaging: The 10-Minute Underwriter Test
- 1-page summary: deal snapshot, total cost, draw plan, timeline, exit math, team.
- Evidence tabs: photos, comps, scope/budget, permits, insurance binder, liquidity proofs.
- Naming hygiene: 123-Main-Scope-v3.pdf beats FINAL_final_scopeNEW.pdf.
What Actually Moves Pricing & Leverage
| Factor | Impact | What to Do |
|---|---|---|
| Experience | +LTV / –points | Add partner resume if you lack reps; show on-time exits. |
| Liquidity | –reserves requirement | Document float capacity and vendor terms. |
| Scope quality | Fewer conditions | Add units, quotes, and contingency. |
| Exit realism | Faster CTC | Pre-wire DSCR calc or DOM plan with comps. |
Red Flags (Disarm Them Early)
- ARV optimism: If three “comp” sales sat 45+ days, they’re not comps. Right-size the exit price or finishes.
- Thin liquidity: Show vendor credit lines or reduce scope to match reserves.
- Permits unknown: Email from the city stating requirements and target inspection windows.
- Surprise change orders: Treat them like mini credit events—source of funds included.
Case Studies: Same Borrower, Different Outcomes
Case A (Win): Clean 1-page, realistic comps, vendor quotes attached, liquidity screenshot with 90 days history. CTC in 48 hours, 0.5 pt shaved at close.
Case B (Grind): Inflated ARV, finish scope vague, no contingency. Three back-and-forths, extra reserve required, and leverage cut 5%. Same borrower—different packaging.
Pre-Submission Checklist (10 Minutes)
- Numbers foot: total cost, proceeds, carry, cash-in/out.
- Comps adjusted; photos annotated; finish level explicit.
- Scope with units, quotes, and 10–20% contingency.
- Liquidity proof (float or reserves) with clean paper trail.
- Exit math: DOM or DSCR, with Plan B (IO or price band).
Bottom Line
Underwriters say “yes” when you make the story obvious. Hit the five pillars—experience, liquidity, credit, collateral, exit—on the first pass. Your reward is better pricing, cleaner conditions, and a reputation that gets future deals approved faster.
