Question: I have someone who is willing to give my husband and me a hard money loan but wants a $7500.00 deposit. Is this typical for this type of loan? We are just learning about this type of loan and we have no up front money to put out. That is why we were looking at this type of loan. We were very disappointed to hear this. Are there other hard money lenders that will not require any up front money? Billie
Answer: – Yes and No. Because of what’s happening in the economy today, more and more hard money lenders require “skin in the game”. Especially if you are new to the investing game and don’t have a relationship with the company yet. It’s getting harder and harder for individuals to qualify for loans. So yes, many hard money lenders require something. However, there are some still out there that will lend based on the property along with financial’s and credit. The challenge is finding them. One of the best things you can do is visit every title company in your area. Find the best escrow officer from each title company and see if they have referrals. Investors always find the good title companies with creative escrow officers because it makes our jobs easier. Many investors have money and are always looking for good deals. Talking with the right escrow officer will help you find the perfect hard money lender to help you. And a lot of the time, it’s all word of mouth or referral so you can’t find them in the yellow pages.
There is also great concern about the practices of some lending companies in the industry who require upfront payments to investigate loans and refuse to lend on virtually all properties while keeping this fee. Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding in order to reduce this risk. If you feel you have been the victim of unfair practices, contact your state’s attorney general office or the office of the state in which the lender operates.