In most cases, hard money loans are used for funding transactions that need a sudden turnaround, for example, 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. There are numerous hard money lenders and to select the best, take into account the below factors.
Ensure you determine what to do with your hard money loan. Do not hurry to take a hard money loan while you have not conducted a comprehensive assessment of your needs. Some hard money lenders focus on foreclosure rescues, or investor financing or commercial properties. Knowing your needs will not only help you to focus your search on the right hard money lenders but also ensure they are professionals in hard money lending.
Choose a local hard money lender. There are reasons why you should select a hard money lender near you. A local hard money lender is experienced in giving loans in your market. Moreover, the hard money lender makes sure it is precise in underwriting your asset because it takes into consideration your specific market’s activity. Additionally, local lenders have an interest in your personal success thus more personalized attention.
Make sure the degree of transparency is checked. The parties involved should have the ability to access the loan data such as fees and any third party cost so they can know what is expected. The hard money lender is also supposed to follow the published loan program guidelines. A suitable hard money lender must return calls, answer your questions, and complete draw requests without any delay.
Make sure a hard money lender possesses a license. You should peruse the license of your hard money lender to ensure it is valid. 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. Furthermore, if a hard money lender failed to address any complaint, you will know of it.
Make sure the interest rates are taken into account. Before applying for a hard money loan, ensure you know the interest rate a lender charges. If a hard money lender does not seem clear about their interest rates, avoid them or you will pay more than the agreed rate. Additionally, compare the interest rates charged by various hard money lenders while being keen on comments from their past clients in order to decide wisely.