Hard money lenders in Chester County PA can provide you with the kind of capital you’re needing to grow your real estate investment business. It doesn’t take much before you tap out at the bank and need to find yourself a more appropriate lender for the kinds of loans needed in real estate investing. But how do you find the right hard money lender for your business? It can be like The Dating Game—that TV show from the 1960s where a bachelorette would ask questions of three bachelors hidden from her view and then select one of them for a date. Here are some questions you could ask prospective hard money lenders in Chester County PA to find out which one is the best lender for your situation.
1. What kinds of projects do you fund with hard money loans?
It’s good to find out if the prospective lender specializes more in commercial projects or residential fix-and-flips like you’re doing.
2. How many loans did you do last year for residential real estate investors?
You’ll want to know that your hard money lender in Chester County PA is experienced working with rehabbers like you. Chances are, you’re not looking for just one loan, but to start an ongoing financial relationship.
3. Do you loan based on the ARV or the property’s current value?
Rehabbers typically want to deal with hard money lenders who will allow them to borrow based on the ARV (After Repair Value) rather than the property’s current value. You may also want to ask about how much money can be loaned, as different hard money lenders set it from 65 to 80% ARV. It’s also important to know how the ARV will be calculated, based on appraisal or comparable sales data.
4. How much money is the borrower required to put down?
Again there is much variance here among hard money lenders in Chester County PA, requiring borrowers to put down anywhere from $0 to 20% or more of the ARV. (Note: just because some lenders might require you to put some of the money down, don’t cross them off your list right away. Down payments of your own money is just one of many reasons to work with a lender.)
5. Will you be checking my credit score or history?
To hard money lenders in Chester County PA, the value of the deal itself and the quality of your rehab plan are generally much more important than your personal credit score or history. It certainly helps to have a solid track record in flipping houses successfully. While some lenders do not check, others will still need have a minimum credit score requirement.
6. What is your interest rate and how many points do you charge?
Borrowers can expect to pay interest rates ranging from 8% to 15% on hard money loans and points ranging from 2% to 4% of the loan amount.
7. What other additional fees or charges should I know about?
Even if you get a quote on a loan, some lenders may leave out processing fees, the cost of underwriting or “administrative” fees. As these can add up, it’s good to know upfront what you can expect.
Asking these questions and getting the right answers will help you find the right match from among the hard money lenders in Chester County PA.