7 Things Every Borrower Should Ask Their Hard Money Lender
Are You Wondering Which Jacksonville Hard Money Lender Is Right for You?
As with any type of mortgage or loan, it is imperative that you undertake your own due diligence before you move forward with your preferred hard money lender. These 7 questions are critical things to ask before closing on hard money loans.
1. Are You a Direct Lender or a Hard Money Broker?
As the term implies, Direct lenders lend money directly to the borrower by tapping into their own capital reserves. Hard Money brokers do not lend themselves, but they connect borrowers with lenders and because brokers are able to work with many different hard money lenders, quite often they are able to secure better rates and lending terms than a direct lender.
The best brokers will be able to help you find the best lending deal quickly. A less than great broker may struggle to find you money fast, that will close because they don’t have the necessary relationships with enough hard money lenders.
We work with hard money lenders in every state of the U.S. looking to loan to local (and nationwide) investors, that’s why our google ratings cement us as one of the best hard money lenders nationwide.
2. Are You a Licensed Lender In My State?
Licensing requirements differ considerably between states, and in some states not all lenders necessarily will be required to have a license for all transactions.
Even so, the most reputable lenders will almost certainly be licensed and registered with all necessary state and national governing bodies.
Jacksonville Hard Money Lenders have partners in each U.S. State so if you’re ever doing deals outside of Florida, you should let us know.
3. Do You Have a Track record Of Lending To My Type Of Property?
You can get a hard money loan on most types of property, but it’s not unusual for lenders to specialize in one particular niche (for example, fix n flips of single family homes, individual apartments, multifamily apartment buildings or other specific commercial property types). At Jacksonville Hard Money Lenders we have a long track record of lending for all real estate asset classes – there is no project we won’t consider based on the type of project alone.
4. Is The Hard Money Lender Based Locally or Somewhere Else?
Some lenders will want to inspect the property before financing your loan, in which case we only recommend deals which are local to the lender. But the majority of lenders do not insist on physically viewing the property themselves and are comfortable relying on the opinion of our team of expert appraisers and inspectors.
This is great for borrowers because you are afforded access to a much larger pool of hard money lenders who are more likely to be able to loan on terms which you are happy with.
Our approach at Jacksonville Hard Money lenders is that we decide on a case by case basis. If you have taken out a hard money loan with us previously, be it a hard money construction loans or for some other purpose, we are less likely to do an appraisal.
5. How Does The Hard Money Lender Asses Fees & Charges?
A hard money loan can have either a fixed or variable interest rate – it all depends on the specific type of loan.It is normal however for loans to be structured with a balloon payment at the culmination of the loan term.
Look for a lender that does not make you pay interest on undrawn construction funds and a hard money lender that does not have early payment penalties.
Jacksonville Hard Money Lenders definitely does not charge these fees, our focus is giving you capital to put to work, getting paid back according to our agreed terms and lending to you again so you can grow your business as fast as you want to.
6. Are Your Loan Rates Competitive? Are They Better Than The Competition?
As a hard money lending broker with strong relationships with capital providers all over the U.S. we are continually able to secure hard money loans at some of the best rates and most attractive loan terms.
It is important for anyone considering a hard money loan, that the structure of the loan can create significant variations in the overall costs you pay.
As you compare us against other lenders, here are a few things to consider:
- WHAT INTEREST RATES WILL I PAY ON THE BORROWED MONEY? – Interest rates for hard money loans are higher than those for conventional loans because the risk is greater for the lender and borrowers are able to access money faster and often on terms more favorable to them. Having said this, it is still normal for there to be substantial variation even among hard money lenders in your area, often due to the local competition that is present and unique characteristics of your deal and your experience. It is important to understand that even the actual loan amount you are seeking can impact the rate. So shop around, we urge all our prospective clients to do this. But understand because of our vast network of capital providers that we consistently offer some of the very lowest interest rates of any hard money lender in the U.S.
- ADDED FEES…ARE THERE ANY I MUST BE AWARE OF? – Be sure to ask your lender if your contract outlines all fees associated with your loan. As an example, most hard money lenders use origination points to calculate the fee in order to process your loan. One origination point equals one percent of the loan in most instances (and this is how we calculate origination points). Plus, some hard money loans also include a down payment and prepayment penalty fees.
- WHAT IS THE LOAN-TO-VALUE RATIO – LTV or Loan-to-value ratio can materially impact several of the costs pertaining to your loan. High LTV ratios are deemed to be higher risk, and as a result will often mean more costly loan terms. Many private investors will still favor maximizing their leverage with a higher LTV even though this will equal paying higher rates. And then there are plenty of people who are more sensitive to rates. We will arrive at the LTV by dividing the loan amount by the value of the property.We can be flexible and can either use the property value or after-repair-value (ARV) to calculate LTV. Which we use depends on factors such as your experience, your borrowing history with us and the actual forecasted ARV.
7. Will A Good Borrowing History Speed Up The Approval Process?
For many real estate investors, deal flow is regular and the amount of deals you can invest in is only limited by how quickly you can access suitable funding.
The good news is that once you have borrowed from us, the loan application process will be simplified and a little quicker. We still want to review and appraise the property of course, but we don’t need to conduct the same background and document checks as we did the first time you borrow from us.
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