What makes a good hard money lender?

10 Replies

I'm looking at some HMLs in my area. Some have better rates than others but what should i be looking for besides lower rates? Most of them seem established enough to be reliable so what am i missing?

Read the terms of the note. Is there the ability to extend the loan if you need too? How much does the extension cost? Do you have to personally guarantee the loan? What is the LTV based on.... After Repair Value or Purchase Price? How much cash do you need to bring to the deal? Does it matter where the cash comes from? Will the lender allow a 2nd position lien?

Happy Investing

Originally posted by @Derek Dombeck :

Read the terms of the note. Is there the ability to extend the loan if you need too? How much does the extension cost? Do you have to personally guarantee the loan? What is the LTV based on.... After Repair Value or Purchase Price? How much cash do you need to bring to the deal? Does it matter where the cash comes from? Will the lender allow a 2nd position lien?

Happy Investing

good list.. I don't know many or any HML who are up and running concerns these days that will loan without a PG.. but maybe they exist

in my mind a good lender is one that is responsive and closes on time every time.. depending on your volume..

when I had my HML shop that was the number one concern of my clients.. close when we said we would close.. no BS that causes extensions alterations of contract risk of losing EM etc etc.. when you say close in 5 days you close in 5 days.

No changing the deal after you give a quote.. that's one I see often these days  teaser rates.. 

Originally posted by @Derek Dombeck :

@Jay Hinrichs

We do lend without Personal Guarantees, but typically that is only with established clients and also when the deal is strong enough to support itself in the event of default.

Happy Investing

 there in is the rub most folks that need HM  don't get that good of deals or are that strong of borrowers if they had all that they go to the bank.. but I hear ya.. I have done it before as well.. 

What @Jay Hinrichs said was spot on: Close on time, every time. The best terms on the planet mean nothing if you lose the deal (and your EMD). I can tolerate terms changing (because nothing is concrete until the appraisal comes back anyway), but can't stand it when lenders won't close on time.

When you compare rates and terms, don't forget about the fees.  I've seen lenders charge as little as $0 junk fees and as high as $5,000.  They rarely ever advertise their fees, and sometimes their points.  They always try to reel you in with the rates.

Also cover your downside.  Get a longer loan if you can (9 or 12 months), and understand extension policies.

Never pay any money outside of or before closing unless it's for an appraisal.  You should be able to get pre-approvals and POFs from lenders without having to pay anything.

@Greg Cadwallader I have to disagree with you on the direct lender vs broker.  The good brokers negotiate wholesale pricing with the lender so that they can offer the same loan terms to the borrower, sometimes even less than if the borrower had gone direct.  Those are the brokers that are adding value to their clients.

Originally posted by @Grant Rothenburger :

@Ryan Kaysen Some other's have kind of mentioned it, but customer service. Can you reach them? Are they nice on the phone? This can say a lot about a company.

do they speak intelligible English you mean ?