Hey so I’m looking to obtain hard money for a deal I’m interested in within NJ. I was emailed by a lender whom I’ve check using Facebook that wants to loan me 160 at 10.54 for for this deal with me placing 1708. Upfront for loan fees. I want to know is it common for hard money lenders to ask or lenders in general to ask this before the provide funding? What is common practice and what are the best ways to check the validity of a lender and protect oneself against scams?
Most legit HMLs are sensitive to the scamming and may ask something nominal - a few hundred to begin processing. Patch of Land and Lima1 do this. Later, you pay for an appraisal but with Lima1 you'll get a call from appraiser directly to get access and pay directly. But these are well known entities so it's not a concern. $1078 seems high enough and the rate high enough that it's a red flag for me. Caveat emptor!
We do not require any up-front due diligence fees on any of our loan products, but buyers/borrowers do need to pay for the appraisal. Due diligence fees like the one you are describing used to be a lot more common, however many "lenders" became fee hunters and were improperly taking advantage of customers by requiring upfront fees and not delivering on the back end by funding the loan. Depending on your credit situation and what the deal/project you are structuring with this lender is, rates around 10% are fairly common in the hard money space. However, the $1708 up front fee is already more than 1% of the $160k loan amount you have requested from them. Does this fee cover the cost of the appraisal or will the appraisal fee be an additional out of pocket cost you will have to pay? What type of property is it, commercial or residential?
Nope, no way.....you’ll just be contributing to the scammer fund. And, 10.54% Interest is a bogus number, nobody lends at that odd numbered rate.