Every broker needs a handful of hard money lenders as a part of their portfolio of professional contacts. While hard money can be expensive, in many cases, it can also be the only way to source debt for customers whose situation is unsuitable for traditional lending. In particular, if it’s a hard-to-fund property, brokers may find it difficult to match the right lender to their client’s transaction. Here are a few things that brokers look for when choosing who their sources of hard money should be:
Favorable Rates and Terms
While hard money lenders are never the cheapest lender in the market, brokers try to find lenders with terms that will make their clients happy. Although a double-digit interest rate is common, brokers look for firms that charge origination fees in the 2-3 point range.
Solid Loan to Value Ratios
Since most real estate purchases want to maximize their leverage, brokers are always looking for hard money lenders that can fund loans with the highest LTV. However, keep in mind that hard money lenders want equity. So the borrower must have enough “skin in the game” and have the ability to repay the loan in order for the hard money lender to fund the transaction. We have loan programs that go all the way up to 90% of costs.
Mortgage brokers connect their clients to hard money because they know that, in exchange for a higher cost of funds, the loan can actually close. While hard money loans require due diligence, brokers expect that the loan will be able to close quickly and to close without unreasonable levels of paperwork.
All things considered, brokers realize that in today’s economic climate, that it is in their best interest to establish working relationships with several hard money lenders. It is another valuable resource to have in your broker toolkit enabling you to be a more valuable asset to your clients while providing the means for a considerable source of income for yourself. At the end of the day, brokers want lenders that make their customers return for more loans. Finding hard money lenders that do that is what really matters to mortgage brokers.