When you are a new hard money borrower, you may be terrified when asking about a hard money loan. In addition, your lender might be the one asking all the questions and dictating the conversation. With the four questions below, you should show your hard money lender that you are conversant with the industry and have done background research. The questions will also assist you in avoiding getting in an unpleasant situation with a lender who fails to deliver your expectations or may add a lot of fees. When a lender gives you unacceptable answers to the questions below, it may indicate that they are not competent; thus, you need to find a new one.
1. How Much Experience Do You Possess in the Money Lending Industry?
When seeking a hard money lender, it is very crucial that you make sure they have enough experience in the field of hard money lending. Additionally, they should have specific expertise in the type of hard money loan you request. More experience means that the lender is generally better. It should be in the best interests of the lender to ensure that their clients succeed. As a borrower, you can benefit from leveraging the level of experience of the lender to escape any potential pitfalls.
2. What Is Your Real Estate ID?
Before agreeing to your terms with the lender, ensure that they are licensed. Their license ID should, however, be shown on their website and on any advertising material. If you find none, ask the lender for their license ID. You can use the ID to further search on the national website, which shows all information about the lender.
3. Are You a Broker or a Direct Hard Money Lender?
A direct hard money lender processes the full loan and funds it with resources that are internally available. On the contrary, a hard money lender broker sends a request to a different source to get funds. A direct hard money lender loan is often smoother and faster. However, in some cases, brokering a loan from an outside source leads to fewer costs incurred. The direct hard money lender may know where to source the funds, or the broker may be conversant with another lender specializing in specific requests, unlike other lenders. Both circumstances are suitable, but you should know what circumstance you are engaging with and the type of lender.
4. What Is Your Interest Rate, and How Many Points Do You Charge?
Generally, the interest and points of a loan determine its overall cost. After you consult with a few hard money lenders, the interest should be in the range of rates charged upon loan request. While this question might be what you are mostly concerned with, remember that a lender’s experience and reliability should be considered heavily.
We hope that you found the guide above helpful about what questions to ask to be sure whether to take a hard money loan. Use the list to evaluate lenders whenever you need a loan.