Hard money loans are common in transactions that require quick turnaround time. One of the most common instances you might need a hard money lenders’ help is with a fix and flip purchase. Unlike commercial banks where loans are held for a long time, hard money lending involves few bureaucracies.
In essence, hard money loan is usually extended to real estate investors for the short term. The loan can take as few as 72 hours. The interest rates vary depending on circumstances and the hard money lenders you choose. Essentially, the main advantages of hard money lenders are less scrutiny, faster turnaround, and simple application process.
Not all hard money lenders California has to offer are the same. They vary significantly. The tips below will help you avoid getting into a deal with bad lenders.
1. Choose a Company that specializes in Hard Money Lending
While this may appear like a pretty obvious thing, most people cannot differentiate between hard money lenders and a private investor. If you need a hard money loan, ensure you get it from a company that specializes in hard money lending. Firms that specialize in this loan program ensure that requirements such as origination and servicing are met. Hard money loans may appear simple but they need proper arrangement to ensure the process is well facilitated.
2. Default Rates
Hard money lenders don’t have a strict application or funding amounts. While this is an advantage to borrowers, some companies take advantage of gullible borrowers. This is why it is important to know about the amount the lender has funded and their default rate before you walk through their doors. If the lender has a high default rate it could be a signal that the company principles are predatory or bad.
3. Choose a Transparent Company
Before signing a contract, ensure you read and fully understand the paperwork. Some companies may use good rates to lure you into a bad deal. The good thing is that you can easily avoid the bad deals by insisting on transparency on each process and knowing the exact terms of the deal.
4. Understand Your Needs
There are numerous categories of real estate investors. Some are house flippers who buy cheap and sell at a profit while others buy cheap houses and rent them out. Still, other investors are more interested in commercial properties. You should know the kind of investor you are in these categories. This will help you secure the best rates and choose the best lenders. While some lenders provide loans for commercial real estate, others have several loan programs for numerous investment opportunities.
5. Choose Local Lender
When applying for a hard money loan, everyone will be interested in your property equity. The reason is that the equity serves as the security against default. Therefore, it’s common for lenders to inspect your property before extending a loan to you. It’s prudent to choose a local lender to ease the inspection process. Also, local private loan lenders tend to offer more specialized services.
6. When Do You Need the Loan?
While hard lenders offer loans faster than conventional banks, each lender uses a different timeframe. Some lenders can take more than seven days while others issue loans in less than five days. Knowing how fast your local lender gives the loan will help you make a good choice.
7. Licensing
Before taking a loan from a hard money lender, ensure they have a license from the relevant authorities. A good lender should have a license from their state department of real estate and organizations like Nationwide Mortgage licensing system and registry. Also, ensure the company has a license from a valid real estate broker.
But that is not all. Check whether there are complaints against the company. You can even go a step further and check the company’s website and other social profiles to get a more well-rounded idea of the company. An ideal company should have a consistent business image.
8. Choose a Company that Offers Standard Rates
Always watch out for unusually high loan rates. Most hard money lenders fund loans ranging between 60% to 80% loan to value. Usually, the lenders offer loans for distressed properties.
Contact GW Private Capital today
When choosing a hard money lender, go for an experienced and reputable firm: GW Private Capital.
