iStock_000001879496XSmallAnyone who is thinking of going into the real estate investment business and is going to need a “non-standard real estate loan” should be sure they know how to find a good “hard money” lender.  Here are a few pointers:

  • Figure out what kind of loan you need.  Hard money lenders know what they are doing, but some specialize in certain kinds of loans.
  • If a hard money lender makes a deal sound too good to be true, well, you know the drill…it is.
  • Only work with a hard money lender if he clearly posts his rates. otherwise, no.
  • Hard money loans should have interest rates of 12%.  Lower and you might be dealing with a lender who will charge you for hidden costs and fees.
  • Legitimate hard money lenders are going to want analyze the property before they give you a loan.  They’ll want all the details on the loan application along with a physical examination of the investment property.  Any lender who doesn’t do a thorough analysis of the property does not understand the process.
  • Any hard money lender will have to turn down some applications because they are too risky.  That’s how this business agreement works.
  • A good hard money lender will discuss any changes to the loan before you close on the property.  That is the ethical thing to do.
  • A good way to find a legitimate hard money lender is by asking people who have worked with them for a reference.  Good lenders have good referrals.
  • A great person to ask about private money lenders in you area are settlement/closing attorneys.  They take care of the loan documents for hard money lenders.  Accountants are great resource people, as well.
  • Some mortgage brokers are familiar with good hard money lenders.  They would be glad to recommend a name to you.
  • Ask the lender you are thinking of using about their experience in this business.  Ask them to talk to you about their backgrounds in real estate investments.
  • Good hard money lenders are speedy, which is imperative in the world of rehab loans.  Look for lenders who emphasize their ability to get things done quickly, which is often a make it or break it issue in the hard money real estate world.
  • A hard money lender who is legitimate will involve you in very little red tape.  Just like speed, getting the job done without an overwhelming number of obstacles to jump over is good for the lender and good for the borrower.
  • Every lending company should have a complete and transparent term sheet explaining every aspect of their loan process.  This page is the backbone of their business, so their should be no surprises or changes where this information is concerned.
  • On the other hand, a good lending business will try to be flexible where they can be, and make sure that you understand the areas where they can’t be.

When you have found a lender who meets all these criteria, sign up with them and don’t look back!