Real estate investors have long used hard money lenders to finance their real estate investments for reasons of speed and flexibility. But for those who have never taken out a non-bank loan before, there are certain things every real estate investor should know about hard money lenders. Here are just 3 things every real estate investor should know:
1. Not Every One of Them Is Legit: There are a lot of loan scams in the hard money space so be wary of fake lenders who don’t have the ability to do a deal. Most of them are just collecting upfront fees from borrowers!
2. Don’t Assume a Hard Money Loan is Like a Bank Loan: The process of obtaining a hard money loan is completely different from the home mortgage loan process that is typical at your bank or credit union. For example: documentation requirements, valuation determination, speed of funding. These are just three examples of how the process differs greatly between the two types of lenders.
3. Never Expect No Documentation Just Because it’s a Hard Money Loan: So many people assume that just because it’s a hard money loan that there are absolutely no documents required, e.g. loan application, credit report. Although the documentation requirements of a hard money lender may be LESS than a bank lender for a loan approval, it does not mean they are non existent. Each lender has its own list of documentation requirements, so ask and don’t expect or assume that there’s no documentation required.
These are just 3 important things that every real estate investor should know about hard money lenders. Are you a hard money lender yourself, or are you a borrower who is seeking private money financing? What else would you add to this list?
(Article Source: http://privatemoneyutah.com/3-things-to-know-about-hard-money-lenders/ )
Posted by Corey Curwick Dutton, Hard Money Lender
Well said Corey. I've got nothing to add to those three general statements about HMLs. Great job informing the community about so many different topics I have seen you post information on!
Thanks Darren. I think these 3 things are the most common misconceptions/assumptions people have/make about hard money. Especially the last one!!!!! Thanks again!
i have seen ..few deals that look promising ..diferent hl..want diferent paper work and so on...the question...if a deal that requieres 150k .hml loan with 3 points..interes only ...how much money..ill need at from.? thx in advance...$500..up from to review the deal..and documentation...thx..
What are you getting for the $500 upfront? (e.g. Appraisal, inspection, legal documents for closing, etc.). Has this lender given you formal terms in writing yet? Have you verified what deals they've closed in the immediate area? They should not be afraid to share deals they've closed, if they are offended by that, then this is a red flag. I'm proud to share the recent deals I've closed and would never be offended by that question.
Does this lender's terms seem too good to be true? What are the actual terms they are offering?
You have to bring in the points at closing with most hard money lenders on a purchase loan. Not sure what your question is though...
thx..ill sit down with them next monday...ill add your question..the $500....aplication..and reviwe the contract....thx...ill let bp..about the meeting.....thx
@Corey Dutton good summary, good points!
Good points. I do HML. I don't require appraisals, app fees, any of that stuff. IMO a true HML lends on the quality and value of the asset. That is exactly what I do. Not once have I ever requested an appraisal, credit report, or app fees. Everything is strictly tied to the property. For the most part my loans have worked out very well. I have never lost on one, but have learned a few things the hard way. I am fond of doing HML and am working with a guy right now that wants 200K. If it makes sense I will fund it within 3 days and close within 5 days.
John T., clearly confirmed here something I pointed out in No. 3, which is that every lender has different documentation requirements. Some hard money lenders want the sun and the moon, while others like John T. don't gather a lot in the way of documentation. Every hard money lender is so different. Thanks John T.
@Corey Dutton wondering has the hard money industry been
affected by the peer-to-peer or crowd funding lending?
They are claiming such a small piece of the pie at this point that I haven't paid much attention yet. Thanks for asking.