New to the world of hard money and not really sure what questions you should ask of a prospective lender? Hard money differs in many ways from traditional funding, so it’s important to get as much information as possible before choosing which lender is right for you.
It can be time-consuming to do research and hard to know which questions the right ones are to ask. So, we’ve outlined the 10 most important questions to ask a hard money lender and broken it up into two parts.
Below you’ll find the first 5 questions you should ask before choosing a hard money lender to fund your fix and flip or new build. We’ll also give a brief explanation as to why these questions are important, as well as our own answers. After all, we know how important your time is and our aim is to help you accomplish your goals quickly and easily, allowing you to move forward with new projects and make more money!
Here are the first 5 questions should you ask a Hard Money Lender and why you should ask them.
Question 1: Do you require a credit check?
Many lenders will run a basic credit check but that doesn’t always mean your credit score will make or break your deal. Most hard money lenders are asset-based, rather than credit based – meaning the property you’re lending for will secure the loan.
At LRC we do not require a credit check. Your creditworthiness is not taken into consideration when it comes to loan approval.
Question 2: Do you require a background check?
The reason for running background checks is typically to check for fraud charges, money owed to the government, or recent bankruptcies. Hard money lenders are typically dealing with large amounts of money, and they need to be sure this money will be paid back.
We do require a background check, as a precaution we do check for criminal history involving fraud.
Question 3: Do I have to have experience building or flipping houses to get a loan?
Some lenders require you to have a bit of experience under your belt before they’ll consider funding one of your projects. We understand that everyone starts at the beginning and are happy to fund a project whether it’s your first or seventy-first.
Question 4: Is there a draw schedule and how long do draws take to fund?
Depending on the hard money lender, the way you make draws can be more structured and scheduled or on as-needed bases. It’s important to know when you’ll be able to access the money that you are borrowing, as well as how long you can expect to wait until the drawn funds are available.
We do not have a draw schedule; you’re able to make draws the day your project is funded. Our typical processing time for draws is within 24-48 hours. We want you to have the money you need as soon as possible.
Question 5: Do you require an appraisal? If so, what’s fee?
Some hard money lenders will require an appraiser to go out and value the land and property in person. The fee for this is usually tacked onto other junk fees such as admin fees, application fees, etc.
Loan Ranger Capital does all its valuation in-house, saving you both time and money. We’re able to move quickly through the application process because we don’t require you to jump through extraneous hoops to get a loan.
There you have it, folks! The first five questions you should ask any hard money lender before you take out a loan with them. Tune in next Monday for part 2!