How To Checkout A Hard Money Lender

Question

I have noticed that the hard-money and private lenders want lots of personal information. I am not surprised that they want to know about credit, history, work, etc. in order to perform due diligence on making a loan. What I have not figured out is how to screen these so-called experienced lenders from the hundreds posting in my area. I want to do business with a legitimate business so that a lasting business relationship could be formed. What I am afraid of is giving over all my personal information (SS#, retirement & pension figures, account numbers, etc.) to some slick person gathering information. I am not accusing anyone but I am noticing a few I have called seemed a little shady on their questions.

Is there a way to check these companies/people out?

How can I be safe about my loan practices as I venture into hard-money and personal lenders?

Is there a way to check these companies/people out?

How can I be safe about my loan practices as I venture into hard-money and personal lenders?

Jay Hinrichs · Answer

start with lenders were you can walk into their office and eye ball them.. no to be fair I did a bunch of lending to folks out of state.. but it was all in the turnkey space and very controlled.... with fix and flip local.. I would not lend to anyone I did not eyeball and come into the office for an interview with me personally.. I want to size them up.

then I hand their file over to my underwriters to nit pick..

David Weintraub · Answer

Ask them how long they've been in business.

Ask them their average loan close time, and what's the longest it could take?  You want to get them to be honest about things, or at least have an answer.  If they don't have an answer they probably haven't closed many loans.

Ask them "what's your average loan volume each month?"  Again, just to get an answer from them.  If they have an answer that makes sense, then they probably understand the business.

Ask them straight, "What do you expect to make on a deal this size?"  Because that will get them to explain all their fees, etc, without being able to hide this, or that.

Ask for references, be it clients, or other companies they work with.

And yes, if you can stay local, stay local.  If you can't, you can't.

If you're going to let the rates/terms solely dictate your decision, I can almost guarantee it'll cost you more in the long run...

Travis Sperr · Answer

@Houston Pitts GREAT QUESTION!

As a hard money lender - I have people blindly send me all of their personal information without even having a conversation first - it blows me away. Our company has been lending for 8 years and are very well known in our area, but it doesn't excuse how reckless people are with their information. I have closed a lot of loans without even meeting the borrower. So you are right to ask the questions.

I would provide the information they require on a PFS or application - without providing SSN or taxes until you have a deal and approval that feels right

Ask for referrals of other clients

Try to work with lenders in your area - not someone 6 states away

Ask around BP or local meetings about lenders

I would rather pay a little more for the money and know the lender is legit than to look likea fool at the closing table

Not only is it important to know your information is safe, but you also want to know the money will be there when you need it. There is a lot to navigate, but you absolutely thinking about it the right way.

Houston Pitts · Answer

Good points!  I guess I will be doing some more driving to find their offices and see if it is indeed legitimate.  I have two homes I have the chance to get in the next 30-45 days before they look at someone else.  I only want one but a lead led me to a second.  I want to get it secured but it has not been easy finding the right folks in my area (other than the usual lenders).  I will keep looking.  May not get to one of these but there will be others.  I spend two days a week researching and on site visits to property. It's only a matter of time!  Thank you again for your advice. I really appreciate your help with this.

Houston Pitts · Answer

I expect to do my part......

Houston Pitts · Answer

Great points! I will ask those and several other questions.  I am not worried about the terms as I am concerned that they cannot perform as they advertise.  It is a two way street and I expect to do my pet as I also expect they do theirs.  Thank you for your guidance, it is greatly appreciated.

Houston Pitts · Answer

Thank you very much for saying so.  I agree with working locally.  That's what I want, to build that business relationship together.  Things work easier, safer and faster.

Thanks for your input.

How To Checkout A Hard Money Lender

Most Popular Reply