How do Hard Money Lenders Differ from Each Other?
Know your lending options so that you are educated on what to expect when you’re ready to obtain that first commercial loan. There are several things to consider when evaluating hard money lenders.
The following are the varying differences you will encounter when obtaining a commercial loan:
· What is the loan to value ratio of your project? If the ratio is high, the more cash that you will receive for your project.
· What is the minimum and maximum loan amount of the lender?
· Are the hard money lenders that you’re talking with direct lenders (funds in house) or are they a broker? Brokered loans can delay delivery unless dealing with agents that have an extensive rolodex.
· Is the lender local or what geographic region do they serve? Where is your project located?
· What are the closing costs and interest rate?
· Can they close the loan quickly? Are they responsive to you and your project?
· Is the lender trustworthy and experienced in the type of project you are seeking to fund?
When searching for hard money lenders, a Google search will produce hundreds of options. Be sure to look for the following:
Experience. The lender you are talking with should have plenty of experience in the real estate industry as well as experience in the niche industry of hard money loans. An experienced lender will have knowledge in the specifics of hard money loans. The experienced lender will also have the knowledge of procedures and regulations that must be followed which will simplify the process.
Licensed. A hard money lender should hold licenses with state and local real estate bureaus and associations. If the lenders originate consumer loans, then they should be registered with Mortgage Licensing System (NMLS).
Rates and Terms should be Competitive. Look out for lenders who charge interest rates that seem too good to be true. This may be indicators that the lender you are talking with or negotiating with is either unexperienced or untrustworthy.
Transparency is Key
Some lenders will use a bait and switch tactic. Published rates that are very low are often used to attract novice investors looking for the best deal. In all communications, a reputable hard money lender should be clear and upfront about rates, fees and terms.
Quick funding is one of the most common reasons that real estate investors choose to obtain capital from a lender specializing in hard money.
You locate the real estate you want to invest in, your offer is accepted, and now the clock runs, and time is of the essence. You may be choosing this type of lender because of the time-consuming process a conventional lender takes to approve a loan. Then, of course, there is the massive documentation that is needed with a conventional lender. Hard money lenders are known to deliver the loan quickly. As many an investor will tell you, if you do not get the loan funded quickly, you may very well lose the deal. If the lender you’re working with cannot fund the loan in an expeditious manner, you may want to seek capital elsewhere.
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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