Anyone with hard money loan experience

11 Replies

I need help with a hard money contract that I am about to sign. I need to make sure that it isn't a scam. This particular lender doesn't use collateral for his loan. He uses insurance and there is an insurance fee that I have to pay. Other than that, don't have to pay for anything else, but my monthly fees of course. What do you guys think?

@Elizabeth Zuniga

You don't include enough information for anyone here to help you out, except to say that anytime you have to pay a fee in advance to get a HML, the deal stinks worse than 3 day old fish. You didn't mention if the fee is paid in advance, but if it is, then run, don't walk.

Guy Gimenez

@Guy Gimenez Yeaaa, it does have to be paid upfront, which is why I sought help! It sounded weird to me.

Run.

All credible hard money lenders will require collateral. You will sign a note and mortgage or deed-of-trust, depending upon your state. The only insurance you will be required to buy is a lenders title policy and this will occur at closing.

The common scam I see lately is to require the borrower to pay some sort of up front insurance fee. I don't know what it's supposed to insure (please ask, I'm curious), but there is no such thing.  This is nothing more than an up-front fee scam.

Did you find this lender online? Have you actually met him/or her. Do you have any independent references from others you know? Please tell me you didn't send these scoundrels any of your personal credit information, Elizabeth.

Hi Jeff S Na! I did not give him any credit info or anything. I found him online. He said that the insurance is for protection just incase anything happens.

The protection a lender normally requires is sufficient equity in the property. I have done several HML. Everything goes through a title company. I get 1st lien position. I don't ask for a dime in advance. My profit is made with points added into the loan and the interest it generates. This sounds VERY fishy. Anytime a lender (private) wants funds up front I would be very skeptical. If you were dealing with a brick and mortar bank, that would be different. Be careful. It sounds like a scam and the end result will be you will not get the loan but will be out the fees.

John Thedford, Real Estate Agent in FL (#BK3098153)

Yeah, as soon as you hear "no collateral" you can rest assured its not legit.  Its one thing to pay for an appraisal or something prior to a closing, but for the most part all money should change hands through a closing agent for real estate deals. 

Just out of curiosity, how much was the "insurance fee"?

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