Hard money lending is a quick and easy financing solution to fund real estate investments, such as rental properties, rehab financing, fix and flips and even commercial bridge loans. Finding the right lender to meet your unique needs is not always easy. Here are some questions to ask when determining the right lender for you and your investment business.
1. How long will it take you to fund my loan after my application is complete?
Without a doubt, time is money in the real estate investment business. Hard money lenders should be able to approve and fund a hard money loan within 2 weeks. Sometimes lenders can fund deals within 3-5 days. It’s important to note here that it’s critical that you must have all the required documents and items in for your application to be complete. Lenders can get you funded more quickly if you stay on top of completing your application. It also can be helpful to use the same lender for multiple deals, especially if they offer technology and resources like a user loan portal to make the loan process more efficient for investors.
2. Will you provide a pre-approval letter I can use to submit with my offers?
Finding good deals for fix and flip properties is already tough and competitive. Buyers who don’t already have a property under contract and intend to begin making offers soon will have a greater chance of having their offers accepted if they also submit a pre-approval from an experienced hard money lender. It’s important to ask your potential lender if they provide pre-approval letters so you don’t miss out on a good property.
3. Will I work with someone who is knowledgeable about my business and projects?
Not all lenders have experience and knowledge in the game of real estate investing. Choosing a lender that has first-hand experience in the business of flipping homes and investing in real estate is a game changer. Investor Loan Source was created by real estate investors who know your unique needs and understand the market.
4. Do you offer loan extensions?
It’s important to understand if an extension would be available for your loan due to unforeseen circumstances. Establishing this with a lender before you need an extension can be less costly than needing to ask for one once you’ve taken out the loan.
5. Will there be a prepayment penalty if I pay my loan off before the full term is up?
It’s common for many lenders to have a small prepayment penalty when 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. Find out if there are any pre-payment penalties and make sure it works for your proposed timeline.
6. What loan to value of the after repair value are you able to offer?
Hard money lenders loan out based on the after repair value (ARV) of the asset. The loan to value ratio (LTV) of the (ARV) is the loan amount the lender will allow based on the fixed up value of the property. This ratio can vary from lender to lender. The LTV/ARV percentage will also vary based on the property type and age. It’s essential that you find out the answer to this question early in the game to avoid big road blocks and ultimately having to find a different lender or rule out a property.
7. Do you work with customers with imperfect credit?
Many investors worry that they will not be able to qualify for a loan if they don’t have a high credit score. Hard money lenders usually lend based on the project and property itself vs. the buyers creditworthiness. They are a great resource for buyers who have had some hiccups in their credit history. It’s important for you to ask if they have a minimum credit score in the very beginning. Your rate and points charged may be effected some, but oftentimes hard money lenders will not turn you down based on your credit score alone.
8. Do you have any references?
A good, reliable hard money lender will be able to offer references from investors who have borrowed from them in the past. If the lender is unable to provide any positive references, they may not be the right lender for you.
9. What are your interest rates and how many points do you charge?
Points and interest rates vary across regions and by lender. The type of loan is an important determining factor. For instance, fix and flip loan interest rates are often higher than rates for purchasing a rental property to buy and hold. The riskiness of the project also affects the interest rate. In general, hard money loan rates are higher than traditional mortgage loans due to the risk involved. In both traditional loans and hard money loans, interest rates and points charged vary based on a borrowers credit history.
10. What loan products do you offer?
Many investors have different types of properties in their real estate investment portfolio. It’s essential to find a lender that has unique products to fit your unique needs. At Investor Loan Source, we offer a wide variety of loans – fix and flip, rental, wrapable, one-time close fix to rent and commercial loans to help grow your business.
In order to be successful in investing it’s important to find the lender that is right for you and your business. If you’d like to learn more about Investor Loan Source or our products, visit www.ils.cash, call us at 409-735-6267, or reach us via email at firstname.lastname@example.org.