If you’re in the market for hard money, you may be surprised to learn that not all hard moneylenders are created equal. Some of them are far better than others when it comes to pricing and customer service, so choosing the right lender can be crucial to your long-term success.
Check out these seven tips to help guarantee your hard money loan is approved and can help your business or project succeed sooner rather than later!
1) Choose the Right Lender
Not all hard moneylenders are created equal. You should do your homework and ask for recommendations from business associates, friends and family members who have had good experiences with hard moneylenders in your area.
Select a lender that is reputable, has strong local ties and has a long track record of success; you’ll be glad you did when your loan request is approved!
2) Know What You Can Afford
Before you even begin looking for hard moneylenders, make sure you know how much you can afford and that there is enough cash flow from your existing business or jobs (if you have any) to meet that payment.
Otherwise, it’s easy to get stuck in a situation where your loan payments are higher than what you can pay each month. This means no matter how many properties you purchase, your business will ultimately fail.
3) Show Financial Proof
Before you apply for a hard money loan, it’s wise to provide as much financial proof as possible. This means submitting past tax returns, bank statements and any other documentation that will be relevant when demonstrating your ability to pay back a hard money loan.
Most lenders want to see that your personal balance sheet is in good shape and you can afford any interest rates associated with an HML—as well as potential renovation costs—prior to approving your application.
4) Provide Proof of Owner Occupancy
The first step in getting approved for a hard money loan is proving that you’re capable of repaying. Many lenders will require collateral, but some will approve based on other factors such as credit score and cash flow.
Regardless of your individual situation, it’s important to understand what’s expected from you and what types of documents you may need in order to meet your lender’s requirements.
5) Prepare Your Property (If Necessary)
Even if you’re just looking for bridge financing for one home improvement project, hard money lenders will still likely require a formal inspection of your property.
If you need major repairs on your property—say, updating it from a single-family dwelling into multi-family housing—you may even have to get permits before applying for a loan. But don’t worry!
6) Understand the Terms and Fees of The Loan
Before you go any further, make sure you understand what type of loan is right for your project and how that affects your financing costs. A hard money loan typically comes with high-interest rates because it’s a short-term investment.
So, if you plan on paying back a loan in three months or less, then hard money could be a good option.
7) Repay On Time
The most important tip you can follow is to make your payments on time. Even if you are having a hard time coming up with money, remember that a loan secured by collateral is not like your personal bank account.
If you don’t repay it as agreed, you could lose everything that you’ve worked so hard for. Never let things get so bad that repossession becomes an option for your lender. Instead, work with them and find a solution together before it gets out of hand.