hard money lender

If you’re looking to invest in real estate, chances are you’re planning to take out a hard money loan to obtain the required funds. However, when shopping for the best hard money lender, it’s important to ask the right questions. For starters, a hard money loan is a loan that’s secured by the real estate you’re purchasing.

Now that you have the basics, here are more questions to ask your hard money lender to ensure you’re getting a deal that best suits your needs.

What’s the Interest Rate?

Your interest is the largest factor that will affect the total cost of your loan. It’s important to secure the lowest rate you can get. But also keep in mind that the more risky your project is the higher your interest rate.

What’s the Repayment Period?

Hard money loans are repaid over a period of one to five years. Choosing a longer repayment makes your installments more affordable, but your interest costs will increase.

Do I Have to Pay Any Fees?

Generally, a hard money loan comes with fees and charges, such as appraisal fees and document fees. Some hard money lenders also ask for an application fee, but it’s best to go with a lender that doesn’t charge a lot of fees because it will increase the total cost of your loan.

Do I Need to Make a Down Payment?

Some hard money lenders prefer investors to make a down payment to show their commitment. In that case, find out how much you have to put into the deal as a down payment and if the amount is acceptable to you.

How Long Will It Take to Close The Deal?

When investing in real estate, time is of the essence. That’s why it’s important to check the time of closing. In most instances, when you apply for a hard money loan, you can typically get the money in as little as seven to eight days. Find out if the lender takes more or less time.

Will The Loan Be Based On After Repair Value?

You need to know whether the loan will be based on the property’s current value or after repair value. On a similar note, find out the loan-to-value ratio the lender prefers. In most instances, hard money lenders accept LTVs (loan-to-value) of up to 75%. It’s also important to find out how the lender will determine the value of your property.

Hard money loans are sometimes necessary to get your real estate investment off the ground. Be sure to ask your hard money lender these questions and inquire about any other areas you may not be clear on. Ideally, your hard money lender should accommodate you enough, so you can reach a mutually satisfying decision.