How to Choose a Hard Money Lender

Contrary to popular belief, choosing the right hard money lender comes down to more than just who offers the lowest points and interest rates. There are a variety of criteria that should be taken into account including location, property type, credibility and more. It is important to take all these factors into consideration to be able to make a sizable profit and avoid entanglements along the way.

In this day and age, we have a luxury of choices at our fingertips. Life is a buffet and we’re filling up our plates. In the lending world, there is also a wide variety of options available and it’s important to choose which hard money lender will work best for you. You wouldn’t load up your dish with steak if you’re a vegetarian. So, we’ve created a 7-step process to follow so you can ultimately make a better decision.

Need Money for Your Deal?

  • First Interaction Type = "How-to Page"
  • This field is for validation purposes and should be left unchanged.

1. Choosing the Right Type of Property

This is important because often lenders will only lend on a certain type of property. If you’re interested in rehabbing a house with a meth lab history, properties which are duplexes or 4-plexes, or high-end properties, it could prove challenging to find a lender, as many will not lend on those property criteria. Also, check to make sure the lenders can lend in the state in which your property resides. Some lenders lend in 40+ states, others lend in only 2 states. Below is the Do Hard Money property criteria:

  • We loan on unoccupied, single family homes.
  • We loan in 13 states: Georgia, Illinois, Indiana, Louisiana, Maryland, Michigan, New Jersey, North Carolina, Ohio, Texas, Virginia, Washington and
  • Wisconsin.
  • We loan on homes up to $250,000.
  • We loan on rehabs only. We do not provide funding for major structural additions/changes from the original blueprint of the house (such as adding walls or levels).
  • We do not loan on properties less than 900 sq. ft.
  • We do not loan on properties in rural areas.
  • We do not loan on manufactured, mobile or recreational properties.
  • We do not loan on properties with significant meth, mold or fire damage.
  • We do not loan on properties with significant foundation or truss problems.
  • We do not loan on properties which require more than $75,000 in repairs.

*Important caveat: If you don’t have a property in mind, there are many lenders who can help you find properties based on certain criteria. For example, Do Hard Money has a variety of property finders which can help, as well as an advanced deal analysis that can help determine risk factors of a property, how much money you can qualify for and how much of a return on your investment you can receive on a property.

2. Compile a List of Hard Money Lenders

After you match up your property with compatible lenders willing to lend on it, another important factor to take into consideration is your experience level with rehabbing and flipping. Some lenders are more suited to beginners/novices, whereas others are more compatible with experienced/seasoned lenders. It’s also important to realize many hard money lenders can focus on the borrower’s credit score and minimum down payment, even though they’re loaning on the property and not the individual. Here is Do Hard Money’s borrower criteria:

  • We provide funding for people no matter what level of experience they’re at. There is NO PREVIOUS EXPERIENCE REQUIRED on any of our loans. Whether you’re a pro or just getting started, we can provide tools and assistance to assess and fund your deal.
  • We do not require a minimum credit score or a minimum down payment for direct loans, or loans in the 13 states in which we lend. For partner loans, we require a low down payment of $7-10k and a minimum credit score of 575. We also provide the option for 100% Financing for qualified borrowers.

3. Compile a List of Hard Money Lenders

After you match up your property with compatible lenders willing to lend on it, another important factor to take into consideration is your experience level with rehabbing and flipping. Some lenders are more suited to beginners/novices, whereas others are more compatible with experienced/seasoned lenders. It’s also important to realize many hard money lenders can focus on the borrower’s credit score and minimum down payment, even though they’re loaning on the property and not the individual. Here is Do Hard Money’s borrower criteria:

  • We provide funding for people no matter what level of experience they’re at. There is NO PREVIOUS EXPERIENCE REQUIRED on any of our loans. Whether you’re a pro or just getting started, we can provide tools and assistance to assess and fund your deal.
  • We do not require a minimum credit score or a minimum down payment for direct loans, or loans in the 13 states in which we lend. For partner loans, we require a low down payment of $7-10k and a minimum credit score of 575. We also provide the option for 100% Financing for qualified borrowers.

Step 3. Do your homework/background check on each lender.

Once you have your list of compatible lenders, make sure you do some detective work into their backgrounds. Check their qualifications and licensing (if applicable). Ask for references from the lenders’ clients/brokers and follow up with them. It’s also important to take a look at online reviews, testimonials and if a high number of complaints have been filed with the BBB. Check if any complaints are left unresolved. Here’s what folks have been saying about Do Hard Money:

:

Satisfied Customer Testimonials with Do Hard Money:

Step 4. Do your homework on the industry standards/what to expect.

It’s tough to compare lenders properly if you’re unsure of the common lending industry standards. It’s also harder to weed out the scam artists if you’re unaware of the bottom line. Legitimate lenders lend 50-70% of the ARV (after repair value) of a property. If a lender only lends on the LTV (loan-to-value ratio), with NO ARV option, they will not cover any of your repair costs, interest or points, and you’ll be out a great deal of money when all is said and done. Here’s what Do Hard Money can do for you:
:

Loan Criteria for Do Hard Money:

  • We loan on the ARV and the LTV

  • We loan up to 70% of the ARV

  • Repair money, closing costs and title fees are INCLUDED in the loan

Step 5. Be aware of the red flags.

When looking for a hard money lender, one of the BIGGEST items to watch out for is how up front and clear they are with their loan criteria right off the bat. Trustworthy lenders will walk you through every aspect of the deal, including fees and any 3rd party costs and they’ll do so right away so that you understand exactly what’s expected and required. If a lender isn’t up front with costs and fees, dances around the subject, evades your questions, or tries to hit you up for items which were not previously discussed, RUN FAST. Here’s what Do Hard Money does for our clients:
:

Lending Criteria for Do Hard Money:

  • We disclose EVERYTHING up front, even before we give you a loan offer.

  • We calculate all 3rd party costs as accurately as possible beforehand.

  • We don’t charge pre-payment penalties on direct loans. If you’re able to pay off the loan quickly, we applaud you and won’t penalize you for doing so.

Step 6. Be aware of the benefits.

Many hard money lenders will have some extra tools, programs, or software they feature along with their loans to help further educate and provide training for investment success. Don’t be afraid to ask which tools the lenders are able to contribute, if any. The best lenders will be invested in your success and will want to help you through each step of the process. For example, here’s what Do Hard Money offers their clients:
:

Benefit Criteria for Do Hard Money:

  • We offer personal Project Managers to help oversee the details of the rehab and ensure the work gets done correctly and on-schedule.

  • We offer a wide variety of tools you can take advantage of to help make your deals more successful: the REI Starter System, Wholesale Professional, Guaranteed 90-day Finding System, Critical Contracts Portfolio and Partner-with-a-Pro System are particularly helpful.

  • We offer an Advanced Deal Analysis software to tell you exactly what risks you may be facing with your deal, how profitable it can be and how much we can lend you, ALL before you even decide to go through with the deal!

  • We offer account advisors and loan specialists to take you through every step of the lending process, answer all of your questions and address any concerns.

Step 7. Compare pros and cons and choose.

Now that you have all of the information you need about your lenders, compare and contrast! It’s always wise to make up a list of pros and cons with each lender concerning your property to ensure you’re working with a lender who would be the best match for your needs. Do Hard Money is ranked high among their lending competitors, provide more tools and have more advantages over the competition. Here’s where Do Hard Money blows away the competition:
:

Competition Criteria for Do Hard Money:

  • Our loan terms are shorter – only 5 months (plus 3 month extension) vs the typical 6 – 18 months of other lenders. Shorter loan periods = less interest = more money in your pocket.

  • We don’t have a minimum credit score requirement vs the typical 600-650 minimum credit score other lenders require.

  • Repair money, closing costs and title fees are INCLUDED in our loans vs the typical “borrower pays closing costs/title fees/20% of the repairs” of other lenders.

  • Check out this link to find out more about how we stack up against the competition: https://www.dohardmoney.com/hard-money-hunger-games/

You are now ready to choose a lender and take the investment world by storm!  Remember, once you choose a lender, take advantage of everything they have to offer and listen to their expertise. We are always here to help you and maximize the return on your investments.

Testimonials

“DHM was a joy to work with. They were flexible, timely and they did what they promised they would do, even when our project ran longer than expected due to contractor issues. We would definitely recommend them to other investors looking to fund their rehab.”

Tony S

“It is not often that a hard money lender turns out to be all it is promoted to be and then some. The videos available on the website are informative and straight-up, not full of hype. Thanks DHM, I am excited to find my first deal and I hope it will be the start of a long and prosperous business relationship.”

Anthony M