When we hear the name “Hard Money Lender” the image that typically forms in our mind is of a man with grumpy faced, branded retro-square Ray bans and black leather jacket who conduct their deals in a dark alley and charge extortionate rates of interest.
The question here arises that what is a hard money loan. In simple words, it is the loan given to the borrower, and the borrower’s property is confiscated by the lender temporarily. The lender is normally a private investor or a company.
Here are ten tips for choosing a trustworthy and professional hard money lender, which will certainly help you out in selecting your lender.
Confirm that your lender has a license:
The best hard money lenders are those who have a license issued by their state’s Department of Housing and Real Estate. A few of the Colorado hard money lenders are also associated organizations like Nationwide Mortgage Registry. Before hiring a lender to make sure you check the license thoroughly. Confirm that there no complaints risen against the lender’s license. If it’s all set, immediately ask him/her to be your hard money lender.
Restrain your search in the vicinity:
Searching for hard money lenders close by is best. It is easy for them to investigate and have a look at the property and lend you the money in person. There will be less chance of fraud if you confine your research nearby.
Compare the lenders:
Don’t just blindly trust a single lender. Make sure you compare the terms and financial rates to other hard money lenders. The best thing about the hard money lenders is that they don’t ask about the processing fees.
Inflict on Transparency:
Every single person involved in the lending process needs to have access to the loan data during the processing period. This means you need to be really careful while choosing the lender. Look out for the lenders who publicize fake advertisement that is actually not available in the real world.
Ascertain your needs:
Don’t rush in getting the hard money loan. Thoroughly research your needs before taking the step. When applying for a loan make sure you give the correct address, find out the transactions closing dates, purchase the price of the property and also figure out the renovation cost. After you are done with this, you can opt a professional money lender any time you want.
Understand the ratios:
Every money lender has different loan-to-value terms. Unlike the banks, lenders use the value of the property as the current price of the property. Lenders prefer asset value over the loan to value ratio. Hard money lenders loan up to 70% while the bank’s’ loan up to 80%.
Negotiate an interest rate:
Feel free to negotiate the rates with the lender. Confirm the rates which you think you can pay easily later. The interest rates usually begin at 10% and go above 15% normally.
Take benefit of fast and simple approval:
The process of hard money lending happens in a short period. This is the main reason why most of the people prefer hard money lending rather than taking a loan from the bank.
Reputation in the market:
Make sure the reputation of the lender you are consulting has a good reputation in the market. Talk with people who have been in touch with the same lender to eliminate any qualms.
Funds availability of the lender:
Obviously, you don’t want to wait for long period to get what you deserve. Therefore, make sure you refer to the right hard money lender who has enough funds to give you the loan.
These are a few tips you need to know if you are looking for a hard money lender. I hope it helps you out.