A hard money loan is one of the easiest and fastest financing options to fund your real estate deals, but it’s also more important to select the right kind of hard money lender for your needs. This will help you to avoid getting into a bad situation with a hard money lender who isn’t able to deliver what you need or adds extra junk fees to the loan at the last minute.
Here are top 10 questions you must ask when seeking out a hard money lender and submitting your hard money loan application:
1. Are you a certified lender?
Make sure that the hard money lender is licensed. If a lender is licensed and state approved, that individual is bound to follow state-mandated rules which provide customer protection. Their license ID should be displayed on their official website and any advertising material they produce. One example is the Magna Capital Group, Inc., you can see license IDs in the bottom of its website www.magnaloans.com.
2. How much experience do you have in hard money lending?
It is best to choose an experienced hard money lender for your project. An experienced hard money lender that has been in business for years, they can understand the cyclical nature of the industry and suggest you the best loan for your real estate investing business.
3.Do you have references from previous borrowers?
You can ask hard money lenders to show their reviews and testimonials by their previous satisfied clients. A reliable hard money lender should not hesitate to give references of their previous satisfied borrowers. The lender may have reviews or testimonials on their own website or third party websites.
4. How do you fix your Interest Rate?
The interest rate completely depends upon the Lender. They determine interest rates by the property type, risk analysis, and your credit rating. Generally, hard money loan interest rates are range from 8% to 18%, but there is greater flexibility in hard money loan rates for quality borrowers.
5. Are there any other charges that will be applied for obtaining the hard money loan?
Some hard money lenders quote interest rates and points and then conveniently wait to inform the borrower of other documents, origination or processing fees. So make sure to ask hard money lenders about all the charges which affect the total cost of the loan.
6. What loan to value(LTV) can you offer?
The LTV is the funding amount a lender provides on the basis of the existing value of the property. The LTV can vary from lender to lender and property type. Some hard money lenders lend on the after repair value (ARV) as opposed to the more conservative current value or purchase price.
7. What types of loans do you offer?
Some hard money lenders are specialized in a particular loan category, while others have a broad loan portfolio. So make sure you select a lender that is more accustomed to a broad loan offering and aligned to your project’s needs.
8. Is there a prepayment penalty?
It’s not uncommon for lenders to charge a small prepayment penalty which means a minimum amount of interest must be paid on the loan. In many situations, the prepayment penalty will not affect the borrower in any way. If there is a prepayment penalty, the borrower must make sure it works for their proposed timeline.
9. How long of a loan term is available?
Hard money loans are normally for short-term use only. Generally, hard money lenders offer 1 or 2-year terms but some lenders may also offer 1 to 5-year terms. Longer the term can lead to increased costs or interest rate. So you must make sure your timeline works with the lender’s loan terms.
10. How long will it take to fund the loan?
It’s important to know how fast your loan can be funded. Hard money lenders should be able to approve and fund a hard money loan within 2 weeks. Magna Capital Group, Inc. can fund hard money loans within 3-5 days in some cases if the funding is necessary to save a deal.
The Last Word:
Choosing an experienced and reliable hard money lender is a very important task in order to make your real estate investment project success. By asking these questions, you can get a good sense of the lender’s services and criteria, helping you to find just the right one for your investment property.
Magna Capital Group, Inc. is one of the most trusted hard money lenders in California, provide hassle-free equity-based private and hard money loans for residential and commercial properties. We understand the most complex hard money loan scenarios and provide asset-based hard money loans to real estate investors, builders, property owners. individuals, corporations, LLC’s, partnerships, trusts and other legal business entities. For more information about our Hard Money Loan Programs, Call Us Today at (310) 734 4044 or Email at email@example.com.