4 Tips to Consider in Finding the Right Hard Money Lender
Those in the real estate industry can spend days, weeks, or even months trying to find the next investment opportunity. While the lucky ones sometimes find a deal within the first few prospects, others who aren’t so lucky might have to spend several weeks or even months before landing a deal. Even when you find the right investment opportunity, you need to fund it or the deal is as good as dead. An increasingly popular way of getting real estate funding is through hard money lenders (HMLs).
Those in the real estate industry can spend days, weeks, or even months trying to find the next investment opportunity. While the lucky ones sometimes find a deal within the first few prospects, others who aren’t so lucky might have to spend several weeks or even months before landing a deal. Even when you find the right investment opportunity, you need to fund it or the deal is as good as dead. An increasingly popular way of getting real estate funding is through hard money lenders (HMLs).
Who is a Hard Money Lender?
Hard money lenders are typically individuals or groups (operating privately) that lend money to be used in financing real estate deals. The main difference between HMLs and traditional lending institutions such as banks is that hard money funding is usually based on the property being purchased rather than the borrower’s credit score. While HML loans are typically easier to obtain, the costs may be higher than what you would get from a conventional mortgage. There are factors to consider to help you select the right hard money lender for you.
Evaluate Hard Money Needs
What do you need the hard funds for? Are you buying a piece of land, home, or a building? Hard money can be used to finance several types of real estate deals. There are lenders that specialize in investor financing, others take greater interest in commercial properties, while others may be more into foreclosure rescue. The one common trait they will all have is that they will want to confirm the existence of sufficient equity before they can give you their money.
Examine the Expertise
Before approaching a hard money lender, you need to determine whether or not they are worth your time. Start by examining the organization’s website. Do they have informative and helpful resources outlining the lending process? Can you easily contact them? Do they even answer calls? Don't be afraid to interview some of these lenders and grill them with questions. Rank them based on their responses and your level of comfort with their knowledge.
Familiarity With the Process
Don’t just assume that this particular lender will be like all the others. While most hard money lenders are very fast in approving and processing loans, you don’t want to sacrifice accountability for speedy approval. Find out how soon you can expect the appraisal and approximately how long you may have to wait for the funds to be available.
Terms of the Loan
Finally, you need to be aware of the conditions of the loan. What is the interest rate? What are the costs? Do you need to put any money down? Can the interest be deferred at the end of the loan? These are just some of the things you need to know.
When selecting a hard money lender to work with, you need to be very careful. As already mentioned, unlike bank loans that tend to drag for several weeks, hard money lenders will give you the money within just a couple of days, and sometimes with no appraisal. However, that doesn’t mean that HMLs are angels. Be sure that you do your homework and consider the factors above to help you make an educated decision that will pay the biggest dividends from your real estate investment in the short and long-term.
Hard money lenders are typically individuals or groups (operating privately) that lend money to be used in financing real estate deals. The main difference between HMLs and traditional lending institutions such as banks is that hard money funding is usually based on the property being purchased rather than the borrower’s credit score. While HML loans are typically easier to obtain, the costs may be higher than what you would get from a conventional mortgage. There are factors to consider to help you select the right hard money lender for you.
Evaluate Hard Money Needs
What do you need the hard funds for? Are you buying a piece of land, home, or a building? Hard money can be used to finance several types of real estate deals. There are lenders that specialize in investor financing, others take greater interest in commercial properties, while others may be more into foreclosure rescue. The one common trait they will all have is that they will want to confirm the existence of sufficient equity before they can give you their money.
Examine the Expertise
Before approaching a hard money lender, you need to determine whether or not they are worth your time. Start by examining the organization’s website. Do they have informative and helpful resources outlining the lending process? Can you easily contact them? Do they even answer calls? Don't be afraid to interview some of these lenders and grill them with questions. Rank them based on their responses and your level of comfort with their knowledge.
Familiarity With the Process
Don’t just assume that this particular lender will be like all the others. While most hard money lenders are very fast in approving and processing loans, you don’t want to sacrifice accountability for speedy approval. Find out how soon you can expect the appraisal and approximately how long you may have to wait for the funds to be available.
Terms of the Loan
Finally, you need to be aware of the conditions of the loan. What is the interest rate? What are the costs? Do you need to put any money down? Can the interest be deferred at the end of the loan? These are just some of the things you need to know.
When selecting a hard money lender to work with, you need to be very careful. As already mentioned, unlike bank loans that tend to drag for several weeks, hard money lenders will give you the money within just a couple of days, and sometimes with no appraisal. However, that doesn’t mean that HMLs are angels. Be sure that you do your homework and consider the factors above to help you make an educated decision that will pay the biggest dividends from your real estate investment in the short and long-term.