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Updated about 5 years ago on . Most recent reply

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Kyle Curtin
  • Real Estate Agent
  • Tewksbury, MA
285
Votes |
494
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Is there anything to be aware of with hard money lenders?

Kyle Curtin
  • Real Estate Agent
  • Tewksbury, MA
Posted

Hi everyone,

I get business cards from hard money lenders at meetups all the time, is there anything I should be aware of with these people or anything “sketchy” that they can do if you work with the wrong ones?

Thank you,

Kyle

Most Popular Reply

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Ann Bellamy
  • Lender
  • Tyngsboro, MA
2,367
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Ann Bellamy
  • Lender
  • Tyngsboro, MA
Replied

Kyle, while you are at those meetings, ask other people if they have done business with the person.  @Jeff S. has given you good advice, and I also have a handout of questions to ask a hard money lender that I give when I speak on the topic in MA and NH.  If you PM me I'll send it to you.  Most of the comments are about fees, but the following are a few additional important points:

  • The reputation of the lender is super important.  Ask around.
  • Back end fees:  Specifically ask to find out if additional fees or percentages apply at the end of the loan
  • Excessive attorney costs:  Many lenders, myself included, require that their attorney handle the title work and closing.  That's fine when the costs are reasonable, but I'm aware of a couple whose attorneys charge 3000-5000 for a hard money closing.  So the rates are low but the fees are high.  Ask about this.
  • There is a difference when you are speaking to a direct lender, and a broker or loan originator.  I know a few local brokers who take months to deliver a term sheet.  You don't even realize they aren't the lender until you are weeks or months into waiting. 
  • I also know lenders who change the terms at the closing table.  What you were told, and what is in the loan docs, are two different things, and you don't find out until the closing when you are pretty much stuck.
  • So pretty much all of these come back to #1, reputation.  It's super important. 

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