If you are shopping for an investment loan with a fast, simple approval process and lower qualification benchmarks, a hard money loan may be the right fit for your needs. Because your credit score is less of a factor in determining your eligibility however, many hard money loans tend to have higher interest rates.
There are affordable hard money loans out there though; you just have to know where to look. It all comes down to choosing a transparent, trustworthy hard money lender to work with. Here are some tips to help you out.
1. Pick a company which has experience with hard money loans—specifically the type you need.
There are legal requirements for hard money loans, just as there are for other types of loans. An expert is needed to structure the loan and satisfy regulations. As a result, you should look for a company which specializes in hard money loans and has the appropriate expertise in the realm of compliance.
Further, you should think about how you plan to use the loan. Hard money loans can be used for a variety of purposes, such as:
- Obtaining financing with a low credit score.
- Short-term financing.
- Financing a fix-and-flip venture.
- Getting around traditional income requirements for prime loans.
A hard money lender who works mainly with consumers with low credit scores may not have the experience needed to help a business customer looking to fix-and-flip.
Conversely, a hard money lender who focuses on fix-and-flip may not be the ideal choice for a consumer trying to work around a low credit score.
Once you figure out your needs, you can pick a lender who will be able to cater to those needs effectively.
2. Look up the lender’s licensing information.
Always check for official licensing before you work with a lender. This is important regardless of the type of loan you are applying for, but it is extra vital with hard money loans.
3. Make sure the lender operates with transparency.
Be wary of promises which a lender cannot possibly keep. You want to look for a competitive interest rate and friendly terms, but you need to think realistically. Familiarize yourself with typical rates offered to borrowers with your credit score, and shop accordingly. If a lender advertises an offer too good to be true, it probably is.
Before you sign on any loan, make sure that you have an intimate understanding of the terms, and you have read all the fine print. You should be able to calculate exactly what you will owe over the lifetime of the loan (assuming a fixed interest rate).
If a hard money lender dodges questions about interest rates, terms, licensing, or anything else, you should probably look for another company to do business with.
4. Choose a lender who can provide what you need in terms of interest rates, approval timeframe, and so on.
Next, you should think about what you usually would when searching for a loan—the interest rate you will pay, the length of the loan, the terms governing it, and so forth. If you are selecting a hard money loan specifically to facilitate a fast and easy application process, ask the lender how long it usually takes to complete approval.
5. Focus your search on hard money lenders in your area.
Hard money lenders may be locally-based or they may operate on a national scale—but you probably want to focus your search on local companies.
Why? A national company cannot necessarily inspect the real estate you want to purchase, but a local lender can. That means that a local lender may be willing to offer you better rates and terms than you would get from a nationwide company. You are getting more personalized service.
6. Be sure to look up reviews.
As a last step when selecting a hard money lender, you should always take a look at reviews from customers online. Use common sense when evaluating reviews so that you do not confuse real, quality reviews with those which may have been left by competitors or purchased to inflate ratings. You may want to ask for references and follow up as well.
Lending Bankers Mortgage Can Help You Find a Trusted Hard Money Lender in Miami
We know how challenging it can be to search for a hard money lender that can provide you with the streamlined financing you are looking for without unwanted strings attached. That is why we partner with more than 130 lenders in and around Miami. We can connect you with a loan of up to 65% on hard money and up to 90% on fix and flip.
We would love a chance to help you save time and money by connecting you with the most suitable lender for your real estate project or purchase. Contact us today at (786) 220-1100 for a free consultation.