Investing in real estate requires large sums of money. People urgently need cash to take advantage of sudden opportunities, which is where hard money loans come into play.
It’s called a hard money loan because the terms are strict, higher market rates, and usually take between 3 to 10 points upfront in fees. Despite this, seasoned real estate investors opt for such loans. How do you go about getting the best loan?
- Locating a lender
The first step is locating available lenders within your area. To do this, you can search the internet, visit local real estate networks, and get referrals.
- Interview
After compiling a list of potential lenders, start interviewing them. Go through a brief conversation with them to better understand each lender.
- Select a lender
Unlike traditional bank loans, applying for hard money loans is quick and easy. About 15 minutes is all it takes to apply for one.
- Disclosures
This comes in the form of E-signs, which serve as the primary disclosure. It essentially gives the lender permission to send you documents via mail.
In most cases, you have to follow the privacy policy, hazard insurance disclosure, fair lending notice, and mortgage disclosure statement to apply for a loan.
- Sign documents
Hard money loans will only be made available once you sign all the disclosures. These include payment guarantee, note, escrow instructions, deed of trust, and arbitration agreements.
- Wire transfer
Once the lender receives all the signed documents, the borrower will pay a down payment. Soon after, the loan is funded by the lender.
