Loan from a direct lender. Scam or Not?

[Nehemiah Smith]

I have someone offering to lend me money as a direct lender. Only thing is, I can’t figure out if it’s legit or not.

[Jeff S.]

Because you can look up an NMLS number doesn’t mean you are talking to a legitimate lender, @Nehemiah Smith. Nor is this the place to trust your instincts. I really disagree with that advice.

Most private/hard money lenders in most states are not required to register with the NMLS. That’s because these lenders generally only make business purpose loans (i.e. for investment property). Nor do most states require any sort of license to loan money secured by real estate, but some do. For example, to call yourself a lender in CA you must be either a CA licensed real estate broker or finance lender. CA does not require an NMLS number for business purpose loans, such as those for investment property.

NMLS and licensing aside, any LLC or Corp doing business in your state will be required to register as a foreign entity in that state. Educate yourself about the requirements in the state you are borrowing and make sure your lender is appropriately licensed and/or registered. Don't accept any excuses.

Even if everything looks great on paper, being able to look up an NMLS number, a broker or lenders license, or an LLC in good standing, doesn't mean you're talking to who you think. Read here.

Stay off the web when looking for money, Nehemiah. You truly have no idea who you are speaking to and some of these scammers are very slick. This is a business based on relationships and your best bet is to find your lenders locally at real estate clubs. There will be no shortage of these in Atlanta. Here’s a link to nearby real estate clubs in your area that could help you.

Understand as well, that avoiding these scams is crazy easy. No matter how they try to guilt trip you, never send any money to a lender. All funds should transfer at closing, thru a neutral party such as escrow, title, or a closing attorney. No exceptions.

And yes, of course this is a scam. No one on the planet is loaning private money at 5%.