Investing 101: Choosing the Right Hard Money Lender
The key to becoming a good investor is to use hard money loan programs to fund your profitable deals. Even more important is finding the right lender! It’s no surprise that shopping around for a lender can be a daunting task. We’re here to help make the process more streamlined. It’s all about knowing basic information about hard money loans and being equipped with the right questions.
The first step is to determine what kind of hard money loan you are seeking. Are you developing commercial properties, or remodeling residential properties? Good hard money lenders know exactly what type of loans they will and will not consider. Deciding which category you belong to will increase your chances of getting the best possible loan, while eliminating options that do not suit your needs.
When comparing hard money lenders, another factor to consider is their interest rates. Typically, lenders charge anywhere between 12% – 16% in annual interest.
Similarly, you will want to know the basic loan terms. Details such as loan length, re-payment frequency, and down payment should be outlined in writing clearly for the borrower to understand and agree upon. If a lender fails to complete this very vital step, do not continue business with them.
Next, analyze your upfront costs. Does the cost get rolled into your loan or do you need to pay towards it at closing?
Keep in mind, if it seems too good to be true, it probably is! Don’t move forward with anything you feel uncomfortable with, even if it seems like a good deal. It may be that the lender you decide on has slightly higher interest rates but is a safer and more reliable bet than competitors. Once you find the right lender, look up customer reviews. Check out their website for any testimonials, as well as the Better Business Bureau. A lot can be learned about a lender’s policies and conduct by simply reading about other peoples’ experiences with them.