Hard money lenders have become popular among investors worldwide because they provide a quick turnaround time with low-interest rates. However, not all hard money lenders are the same. To avoid getting talked into a bad deal, check out these tips for choosing the best hard money lender and ask questions early, so you know what to expect.
Choose a Reliable Firm
When you search for a hard money lender, it’s important to choose one specializing in hard money lending. Not all private lenders are hard money specialists, and the loans they make can be more difficult to close correctly. They may make mistakes that cause negative repercussions, such as delayed closings. Your best bet is to work with a company that is a hard money specialist and experts in the field of hard money lending.
Prefer to Choose a Local Investment Property Lender
Choosing a local hard money lender will save you time and money. A local lender will expedite the inspection process, saving you valuable time and money. This is important because hard to underwrite properties may take weeks or months to get funded.
Insist on Transparency
Hard money lending companies have lax rules and flexible loan requirements to provide quick funding, but the interest rate normally makes this a short-term solution. Some hard money lenders manipulate borrowers with high-interest teaser rates and then charge exorbitant closing fees on top of the loan’s interest for services typically covered by a title company. Insist on transparency in every step of the process to ensure you’re getting the best deal possible.
Know Your Hard Money Needs
What type of real estate investor are you? What kind of investment property financing do you need? There are many types of real estate investors. Also, an investor can invest in many kinds of property. Residential, commercial, and land are different types of properties, and each requires a different kind of financing. Some hard money lenders work exclusively with hard money loans in residential real estate, whereas others offer various types of investment property funding. Hard money lenders know the best options for you.
Lender Vs Broker
Lender vs. Broker can be one of the hardest comparisons to make when it comes to hard money loans. It is so appealing about brokers that they’ve done all the legwork for you in finding a lender – but will you end up paying more in the end since a broker’s fee typically goes toward their commission? On the other hand, working with a local lender offers personalized customer service, but they may not be able to find you an actual lender (making them a broker themselves). Do your research to learn how each of these options works, and choose what type of loan you want with full knowledge of why.
How Fast Do You Need Funding?
If you need a fast loan, talk to a hard money lender. While time is of the essence in most cases, the speed at which the money is loaned out depends on the type of lender. Hard money lenders can close their loans faster than a traditional bank, making their loans ideal for someone that needs funding within a short timeframe. If a short turnaround looks like your best solution, check out lenders who can finance your deal in 5 days or less.