Hard money loans are mostly used to fund transactions when a sudden turnaround is necessary, for example, a fix-and-flip purchase. Hard money loans are good for a quicker turnaround as less bureaucracy is involved. 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 know why you need a 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. In addition to narrowing down your search to the appropriate hard money lender, knowing your needs also ensures you get those with professionalism in hard money lending.
Ensure the hard money lender you choose is from your location. There are reasons why you should select a hard money lender near you. A hard money lender in your locality is experienced in issuing 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. Moreover, local lenders are more interested in your personal success hence giving you more personal attention.
Check the degree of transparency. The parties involved in borrowing a hard money loan ought to be allowed access to the loan data, for example, any third party costs and fees. 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.
Ensure a hard money lender is licensed. You should peruse the license of your hard money lender to ensure it is valid. This assures that the local authorities have examined their qualifications thus being sure they have the right skills for hard money lending. In addition, you are sure the loan rates a hard money lender charges are not exploitive. 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 taking a hard money loan, ask a lender about their interest rates. If a hard money lender does not seem clear about their interest rates, avoid them or you will pay more than the agreed rate. Also, compare interest rates of different hard money lenders while being keen on what past clients say to ensure you make a suitable decision.