Loan Shopping Etiquette

Post date: Aug 08, 2011 9:12:25 PM

The process of shopping (searching, comparing, securing) a hard money loan is in no way shape or form comparable to shopping a conventional loan. There are few rate sheets or pricing matrices as pricing and loan type varies with each lending situation. Loans are tailored to meet the needs of the request and quotes are deal specific.

How much should you pay for a hard money loan?

For everyday borrowers, hard money lending holds no additional risks outside of the higher cost of borrowed funds: i.e. higher interest rate, points and fees.  In fact disclosures, servicing, collection, foreclosure, and pay-offs are all subject to the same rules and regulations as that of a traditional lender.

However, understanding that hard money costs more than traditional financing can save a lot of headache, time and money.

When sourcing hard money, never lead with “what’s your rate”, or “what are your points & fees”. This is tantamount to cheap and brings to mind an adage I often hear used by the honorable Marilyn Milian of The People's Court  (the American television court show in which small claims court cases are heard) “Cheap is twice as expensive!”

Cheaper is not always better. Many times, buying generic is just as good as buying a brand name. However mortgages are not commodities and hard money loans are anything but generic.

Private money loans have terms that are different from the terms offered by institutional lenders and vary depending on the investor, borrower qualifications, loan amount and purpose, property type, location, lien position, term, prepay period (if any) and any applicable federal and state-level laws and predatory lending regulations.


I hear too often from my clients that they should have listened to their gut. Here again, I’m reminded of an adage "if it's too good to be true, it probably is".


Other platitudes come to mind: 

Unfortunately, the process starts all over and they pay again, both in time and money.

The real value in hard money lending lies in its accessibility. Especially at a time when banks aren’t loaning money to even the lowest risk investors, having hard money to access for borrowers who present all levels of risk can be exactly what they need to refinance, buy or invest in real estate.

If you are refinancing or buying property, whether commercial or residential it is important to prepare yourself for financing. Access to capital is a very important part of anyone’s financial stability as well as the success of any business, especially that of a real estate investor. Hard Money Loans will help you have a very profitable business.

Shopping manners play an important part in making a favorable impression. They are visible signals of the state of our manners and therefore are essential to professional success. The point of etiquette rules is to make you feel comfortable - not uncomfortable.