When you go to a bank to secure a traditional loan, the loan officer will often show you a document that shows the total cost of the loan. It will include the interest and all of the fees and is presented in an effort to show borrowers the total in the interest of full disclosure. But that is not always the case when you are working with a private lender for Colorado hard money loans. The documents, fees and even the terms of the loans are left to the discretion of the lender as a private entity or individual. So it is up to you to ask the right questions and request all of the information before agreeing to the terms of any hard money loans.
The first question that most borrowers have is about the interest rate for the loan. This is often very straightforward, much like a traditional loan. But remember that the private lenders can include clauses in the loan agreement that would increase the interest rate if a payment is late. So be sure to verify that the interest rate will never change during the life of the loan for any reason.
Fees for hard money are similar to those of traditional loans. Some lenders will charge a lump sum for processing while others will charge points to cover all of the administrative costs. Points are calculated at 1% of the loan per point so 2 points on a $100,000 loan would be a $2,000 fee. Fees, on the other hand, can vary greatly from lender to lender. A processing and underwriting fee is common to cover the overhead and administrative side of the process. An appraisal fee is charged on every hard money loan and that is really just a pass-through to a licensed appraiser who will evaluate the property and provide the lender with the current market value of the property.
There are some fees that are less common and are often considered to be a signal that the lender might be less than legitimate or desirable. If the lender requests a large application fee which is none refundable, then you might want to seek a new lender. There are people who pose as Hard Money Lenders in Arizona who do nothing more than collect application fees and then disappear. Referral fees are also not too common and can be a sign that the person is not really a lender but is running a scam. Be sure to check out the lender and the person involved in the referral with the Better Business Bureau to verify that both are legitimate.
Lenders who are providing Hard money loans in Colorado are in business to make money. So if a loan sounds too good to be true then it probably is. Check out the lender and compare the terms to other offers to determine if you are getting a fair and reasonable offer or if you might have found a scam that is nothing more than someone stealing money. Always ask for a list of the total cost of the loan in writing to be sure that you understand the cost and that the lender is legitimate.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.