@Joseph Roberts Welcome to BP. See the response from Jeff in the following thread for a great list of questions to ask as you shop hard money lenders:
Some of the items that you will want to evaluate when speaking with different lenders to see which one’s terms fit you best are,
- Loan amount: What will the loan amount be? Is it at a desirable level?
- LTC/LTV restrictions: "Loan-to-cost" and "Loan-to-value" restrictions will vary by lender, but lenders are generally within 5-10% of each other for a given product type. For example, a lender might offer you 85% LTC (loan-to-cost)/65% LTV (loan-to-value).
- Interest rate: What will you be paying to borrow the money? Interest rates from hard money lenders for rehab loans generally range from the high single digits to the low/mid double digits.
- Points: What will the lender charge to originate the loan? If using a hard money lender, you can expect to pay at least a couple of origination points (% of the loan amount) at closing.
- Other fees: The cost of the appraisal, any underwriting fees, etc. These figures all contribute to your total cost of capital, and represent important points to consider as you go about obtaining a loan.
- Term length: How long is the loan? Do you have enough time built in for your investment strategy?
- Is interest charged on the full loan amount or just funded amounts?: This is a seemingly smaller point, but still one that's important to consider, particularly if you end up with a significant rehab budget. If interest is charged on the full loan amount as opposed to just funded amounts, and you have a significant rehab budget, you could end up paying a significant amount for funds you aren't using immediately.
- Lender reputation: Is this lender trusted amongst investors? Have you spoken to other investors who have successfully employed your strategy and gotten positive feedback from them?
- Time to fund: How quickly does the lender move? What is their median time to fund?
The above list is not exhaustive, but serves as a reasonable starting point from which you can evaluate lenders. Asking these questions lets a lender know that you are serious and informed about the process, even if you are a new (or newer) investor.
Hope this helps!
To add to the great list that @Michael Kinsella gave you. You will also need to know if the lender will allow you to roll closing costs into your loan, or paid at closing? Also a very important point is to ask how they handle draws? Can they pre-fund the draws, or will you be paying the labor and materials costs out of pocket, to then get reimbursed at your draw request time?
How and who inspects the draw request? Do they do 1 loan for the full amount of their portion of the acquisition and rehab or are the rehab funds separate? This last point gets back to if they charge you interest on the full loan amount or just the amount that has been disbursed?
What is their fee for an extension and how long of an extension will you get for that fee? Will they allow the seller to pay your closing costs, if so, negotiate that the seller pays them from their proceeds. This should be easily done considering the level of rehab a house may need?
I hope this helps?