Nearly everyone eventually, winds up attempting to take out a loan. The loan may be for a new business, college education or for property ownership. The process of receiving a loan varies.
The best way to maneuver through a loan process is to first find out who is doing the lending. Is the loan being given by a private or traditional lender? This is important, because there are different rules and norms for different types of lenders.
Five Tips About Hard Money Loans
Here are a few tips that should be considered prior to taking out a hard loan.
- expect down payment
- have extra collateral on hand
- be ready to negotiate fees
- expect higher interest rates
- be comfortable with payment due datz
Never be naive to think that a down payment may not be required. If it is not required that’s fine, however never be caught off guard if it is. Most hard money lenders want to see some cash upfront. That’s just how they operate. Even if your collateral is sufficient, they want to see the borrower come up with some immediate cash.
Now if a borrower has built a relationship with a particular lender, there is a possibility that this may not be required. But if the lender and borrower relationship is new, most likely he/she will have to pay. The down payment can be anywhere from 10% to 30% of the total loan. Dallas hard money loans makes it a point to treat borrowers how they would like to be treated.
For example, there are circumstances whereas they may check the credit score of the applicant and notice that it is fairly high, with little or negative reports, and because of that the down payment may be significantly reduced. A credit report with no foreclosures or bankruptcies can only help in these situations. They show that the applicant can be counted on to pay back the borrowed money.
Private lenders use their own money, unlike traditional institutions that use the money of others. Because this is the case, they are able to make various changes to how things are normally done. One of those things are using diverse collateral. If a borrower is coming up short on collateral, the applicant may be able to put up his business or his retirement fund. Dallas hard money loans, will explain to the borrower exactly what this means. Also, they will do everything they can to make sure the potential borrower is able to get approved.
This enables the process to move forward. The applicant fully understands that a traditional bank will not do this. They also are aware that if they go into default, the business could be taken if the retirement funds are cleaned out.
The applicant should come prepared and ready to negotiate with the lender. Being attentive to everything that is spoken is crucial. During the underwriting process, ask the lender if the origination fee or one of the other fees can be reduced or waived. Private lenders have this discretion. After all it doesn’t hurt to ask.
Discuss the interest rates, and try to get the best deal. The lender is doing what is good for him and his company. So it only makes sense for the borrower to do the same.
Attempting to negotiate a high interest rate can help save the borrower money. The rate can go up to as much as 14% or more. While with traditional mortgage banks the rates are as low as 2% or 4%.
And of course the payment due date must be seriously considered by the borrower. Do not just blindly agree to this date. Sit down with a calendar and brew it over.
Remember, the property will need to be completely renovated. Once it is renovated, it will then need to be put on the market. The payment can not be paid back, until home has actually been sold. So all of this will have to be kept in mind.