Although these problems have now largely been addressed, there have been problems with predatory hard money lenders. It is still important to do research to find the best lenders and conventional loans in Houston to ensure that you are getting the best loan and terms possible. Private lenders are great alternatives to traditional lenders such as banks, and credit unions. They are often more accessible, especially to first time investors. There are some important questions to ask before committing to a loan.
What are the Terms?
The most important factors to look into when considering the terms of commercial hard money lenders are points, interest rate, and loan to value. Investors typically want to deal with lenders who offer low points on their loans. At the same time, good financing has higher LTV. Higher LTV translates into more purchasing power. Lastly, the higher the interest rate, the higher the monthly payments and ultimately the more expensive the loan is.
Are There Additional Fees?
It is important to ask for additional fees on the loan, aside from the points and interest. These additional fees typically come in the form of legal fees, underwriting fees, documentation fees, and many more. Significant fees can definitely negatively affect the return on investment. It is crucial that you know about any other expenses beforehand.
How Long is Your Funding Time?
Good quality private money lenders have a short turnaround time for loans. This is especially helpful if you are pressed for time. It is a good idea to ask if the lender pre-approve loans, and how long it takes to process documentation.
What is Your Property and Loan Criteria?
Some lenders work in specific geographic locations or only fund certain types of investments. You need to make sure that your preferred lender is able to cater to your specific investment such as a commercial, small multi-family, or single family property. Lenders who are flexible in types of properties and loan sizes are typically better to work with because they offer more financing opportunity.
What is the Recourse and Non-Recourse of Financing?
Non-recourse financing simply means that a lender cannot seize any assets outside of what the loan is collateralized. This is good for the borrower since the lender cannot go after personal property like a car, home, or other asset in the event of a default. These loans, however, come with some limitations including more oversight from the lender, less access to leverage, and higher interest rate. A good lender should be able to offer both types of loans.
Partner with the Best Lender
Noble Mortgage & Investments is an industry leader in commercial and residential real estate investment lending. The private lending company offers both conventional loans and hard money loans at competitive interest rates. Whether you are a home buyer or real estate investor, consider this leading financial company for all your investment needs. Click here for more information.