Hard money loans are mostly used to fund transactions when a sudden turnaround is necessary, for example, a fix-and-flip purchase. Due to the lower bureaucracy involved in hard money loans, a quicker turnaround is possible. While hard money loans suit commercial and residential properties, you should not take loans involving owner-occupied residences. The number of hard money lenders in the market is very high and to single out the most suitable, ensure you apply the below guidelines.
Ensure you know why you need a hard money loan. Do not be in haste in taking a hard money loan before you conduct a complete assessment of your needs. Some hard money lenders focus on foreclosure rescues, or investor financing or commercial properties. On top of enabling you to limit your search to the fitting group of hard money lenders, knowing what you need also enables you to choose those with expertise in money lending.
Choose a local hard money lender. There are reasons why you should select a hard money lender near you. A hard money lender based near you is experienced in lending loans in your market. In addition, the hard money lender is accurate in underwriting your asset as they have your specific market’s activity on their mind. Additionally, local lenders have an interest in your personal success thus more personalized attention.
Make sure the degree of transparency is checked. The parties in a hard money borrowing deal should be given access to the loan data that include fees as well as any third party cost. The hard money lender should as well act in accordance with the published loan program principles. The right hard money lender will not have any issue in returning calls, responding to your questions, and completing draw requests.
Ensure a hard money lender is licensed. Ensure you look at a hard money lender’s license for an assurance it is up-to-date. This guarantees that their qualifications have been scrutinized by local authorities hence being sure they are professionals in hard money lending. Also, it guarantees that a hard money lender will not charge exploitive loan rates. Moreover, you can check any complaint the hard money lender on your mine left unsolved.
You should check the interest rates. Before deciding to take hard money loan from a lender ask them to explain their loan rates. In case a hard money lender seem like they are hiding something, do not continue with the deal as this may make you pay higher rates than initially agreed. Also, compare interest rates different hard money lenders demand while being keen on what past customers say so you can decide accordingly.