If you are at a stage, where you are in need of quick cash to take a property under contract and your credit history or personal background isn’t strong enough to get you the traditional loans… Then, hard money loans are the best option for you to get financing for your property. But as there are several hard money lenders in the town, these borrowers are confused about how to choose the right lender, who won’t take unfair advantage of them? You will find all the answers to these questions in this article.
If you will stick to this post, then you will find 3 very important steps about how to stay away from bogus hard money lenders, who are only there to charge higher interest rates on the funding they provide. One of the most important factors here while assessing hard money lenders is to look for fee collectors. So, what are fee collectors? Fee collectors just serve as middle men and they have no private money to fund you. They are only there to make you feel like they are doing everything but actually their sole interest is to force you to make a loan application and then collect fees. They have no hand in lending you the money. Your loan application is then forwarded to the actual lender, who will give you hard money loans. Whereas, the fee collector will take at least few hundred to thousand dollars as their fees. This fee is easily avoidable if you are careful and make your moves right. If they are asking you to pay an upfront fee, even before he checks your loan application, then you need to stay away from them. That’s it. Your next step would be to look for a “true” lender.
A true hard money lender will only look at your property and the worth of that property. But if they are looking for your credit history, then they are not the right lender. So, if you have found a lender, who is asking you to give him all the different documentation related to your credit history and other personal history related to job or your work experience, then they can’t serve as a true lender for you.
In the end, there are few important terminologies, which I would like you guys to know. The first thing is after Repaired value (ARV). Most of these hard money lenders can only lend up to 70% of ARV and if they are lending you more than that, then they are doing wrong with you as well as you with yourself. This ARV includes the rehab costs (which are calculated after the rehab has been done). But it is important to realize that the calculation of an ARV is quite tricky. It is important to be sure that the lender is using experienced real estate people to calculate this ARV and these people belong to the area, where your property is held. There are many who use some typical software or other websites to calculate the ARV. You need to stay away from them. licensed moneylender