Hard Money Lending - 3 questions you must...
In your experience, what are 3 "MUST ask questions" when interviewing a Hard Money Lender to fund your project???
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@Sam Nadar Good question! Below are some of the more common questions asked of Hard Money Lenders:
1) What are your rates, and how are they calculated?
- Usually hard money will offer between 7-12% with lower rates offered to those with more experience, better credit, and more capital contributed to the deal. Lenders also vary rates based on state of project and amount of funding.
2) What are your LTV ratios (loan to value) and do you lend based % on resale value or purchase price?
- Most lenders will lend between 65-75% of the resale value, and may offer a variation such as 80-90% of purchase price including or excluding rehab costs up to 100%. Each lender is different, so this is an important question to ask. Another question would be loan amount offered - many will want a deal above $100,000 loan size.
3) What are the origination costs, and other "junk" fees?
- You can expect between 1-5% as an origination fee - also known as points. Other fees may include appraisal, processing, application, etc - so it's good to know these details up front before you decide on a lender based on interest rate alone.
Also, keep in mind if the lender is a Broker or Direct Lender (brokers bring deals to direct lenders and add their fee on top of what they would charge = more expensive for you).