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7 Questions You should Ask your Hard Money Lender and Why

  1. Tell Me About Your Underwriting/Approval Process
  2. Tell Me About Your Loan Closing Process
  3. Tell Me about Your Draw Approval Process
  4. Tell Me About Your Loan Payoff Process
  5. Where Do You Get the Money to Lend to Me
  6. Who Makes the Decisions Regarding My Loan
  7. How Long Before I Receive a Term Sheet with All Terms and Condition

Hard money lenders charge higher interest rates on their loans than traditional bank lenders. The reason that hard money borrowers are willing to pay a higher price for money is better service. Specifically, a service expectation of faster closing times and greater transparency over the course of the pre-close loan approval and post-close draw management processes. However, sometimes that service is not actually provided. 

The answers to the above questions and the way the answers are provided will help you make a more informed decision regarding the fee for service bargain which is the heart of a hard money loan. 

Ideally, what you will hear from your prospective lender are answers that are sensible clear, concise, and transparent. They should tell you about specific timing and milestones. If there are obvious difficulties with your loan such as a low credit score, or a lack of specific experience for the proposed project they should be able to quickly tell you how these difficulties can be overcome, or not. 

Hard money lending is about money, but it’s also about service. Specifically, the ability to deliver money to you when you need it to close the purchase and as the rehab or construction process proceeds. The lender you choose should be able to convey clear and unambiguous confidence that they understand and can deliver the money and service that the relationship requires.  

Questions 5 and 6 relate to that service. If the so-called lender is only a broker pretending to be a lender, the process will slow down. Sometimes, if the loan is problematic, a broker can be quite helpful.  But if the project is straightforward and your experience matches the project then it does not make sense to pay a broker to get a loan. There is a direct lender out there that will be able to help. Perhaps we can. Please give us a shot. 

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