There are many types of real estate professionals, each with their skills and business needs. One group that is often overlooked is hard money lenders. They’re key to your success in the industry. In fact, in some cases, without them, you can’t succeed -or at least not unless you’re willing to source loans from conventional banks.
Real estate investors use hard money services in Charlotte, NC to finance either purchasing or renovating income-producing properties. Since they are short-term loans, they are also used by investors who cannot wait the requisite time for a bank to approve their applications. Hard money lenders approve loans in less than two weeks, and the loans are typically funded within two weeks of closing.
But how do you choose a money lender? What factors do you consider? Read on to find out more.
Geographical Location of the Lender
The Internet has made it possible for people to buy almost anything online. As a result, many people are looking for loans online and opting for lenders such as hard money services in Charlotte NC, based in another state. However, the laws and regulations regarding the lending business vary from state to state. This is why it is advisable to go through a lender based in your state.
Whenever you have to make a hard loan, it is important to have a locally based lender. This is because a lender familiar with the local business scene will be able to assess the risk associated with lending in a particular area. Also, a lender who is located nearby will find it easier than a distant lender to monitor the loan and close deals.
Interest Rate and Value
Private money lending is a rapidly growing industry. As traditional lending institutions have tightened their loan requirements and lowered their interest rates, the market for private money has exploded. This may seem like a good thing, but most private lenders are regular people who have money to lend. Every lender has different rules for approving and completing a loan. Some require a credit score of 740 or higher, some require a down payment, and some require a cosigner.
It’s important to consider the interest rates of a hard money lender. It is especially true for people who need the money in a hurry. The interest charged by hard money lenders can range from 12 percent to 24 percent, depending on the situation, which is much higher than the rates offered by banks. If you have to pay back the loan quickly, a hard money loan may not be the best deal.
Approval Time
Because of the nature of hard money, it is imperative to find a lender willing to work with you and your dealer. If you and your dealer are not a good fit with a lender, you will likely be turned down or have to wait too long for approval.
In some cases, your lender may have the ability to close your loan the same day you submit your application. It will depend on the lender and the property. If you lack a credit score, don’t have a lengthy history with the lender, or are attempting a purchase in a hot market, your lender may need more time to review your loan.
However, a fast turnaround time might indicate a higher interest rate. So, it is up to you whether you want to pay a higher rate for a loan or spend more money on your moving expenses. For example, you might consider paying for a slower-moving company to get an accurate quote.
Check for Positive Reviews
It is hard to find a good hard money lender. Finding a good hard money lender can be easy if you do your research. Online reviews for a company such as hard money services in Charlotte NC are a good way to determine how many people are happy using hard money lenders. The bad ones can also be found, so it is a good idea to use online reviews to look at the companies you are considering.
A bad review means the business is not responding to its customers or delivering on its promises. A good review indicates that the company delivers on its promises and doing a good job. The problem with a bad review is that you will never know about it if you don’t check it.
Additionally, when looking for a lender, you may come across companies that do not loan money and claim that they find you a lender. This is not what you want. You want to find a lender to give you the money you need.
Ensure They’re Licensed
Much money is at stake in the real estate industry, so the fraud and deception that plague the rest of the financial world can also be found here. If you use a hard money lender, make sure they are licensed. You can also ask a local lawyer for a recommendation of a real estate attorney.
As a potential home buyer, you should find out if the lender your real estate agent is referring to is licensed by the state’s Department of Real Estate or a similar department. (This is not required in every state.) If a lender is not licensed, you can be sure that the lender is not covered by state laws regulating state business and that the lender is not required to maintain any financial reserve.
Making sure that a hard money lender is licensed and registered with the state is a sign that you are dealing with a legitimate financial institution. Ask to see the lender’s license. If the lender balks at this request or the permit are unavailable to view, walk away. Although there are a few hard money lenders that are not licensed, a registered lender means the lender is accountable to the state if the borrower defaults.
Wrap Up
When looking for a hard money lender, you must do your homework. First, look for a lender known for giving out loans in your area. If you are buying a property out of state, finding a local lender who can give you a personal reference is especially important. It’s also wise to check the status of the lender’s license with the state where they operate.
