Hard Money Lenders, how to tell if legit

I’m trying to get money for a construction project and all of a sudden, after having problems, I’ve been inundated with people offering me financing. I don’t want them to bail on me in the middle of the project … or some other problem that I can’t think of.

Is there anyplace to check these individual companies.

– None are listed in the BBB. (That’s neither good nor bad)
– They’re not listed in any Mortgage Broker Association (again neither good nor bad)
– Some have had their websites up for 5 + years. (I suppose that’s a good thing)


Ask them alot of questions and you can pretty much figure out if they are legit.

Hello, You would need to do some research on the company or use a HML loan broker. What I mean by research is: call the company, ask them and see if they are listed on the BBB (might be under a parent company name). Also, check out Dun and Bradstreet listings, is the company a member of their chamber of commerce.
Basically, a company is going to “brag” about itself if it is reliable and give you a way to prove it. Hope this helps.

Good questions.

By their very nature HML’s are typically NOT mainstream lenders that are listed in D&B, the BBB or even licensed. HMLs are typically private high net worth individuals or trusts (direct HMLs) or folks that broker loans to High Net worth Individuals or trusts (brokers). Private non-homestead loans are typicall not regulated by the states. Direct HMLs can always give you a much better feel on whether they can do the loan or not as they do not need to shup the loan to other individuals.

HMLs come in many different forms. The best way to evaluate a HML is by asking on board like this for other folks that may have used them Any HML can give you 3 references (a cousin, brother and sister) but the true test is what other borrowers have to say about them.

If you are in Texas there are other local REI Clubs that have BBS that you can ask for info on HMLs. I am sure other markets have the same resources.

Good luck!

Since hard money lenders make most of their money on the fees they charge for the loan, with the high interest rate being a secondary source of income (because most people try to sell or refi as soon as possible). If is in their interest to actually close loans.

However, the biggest tip off to be suspicious, is for the requirement of a large upfront fee.

While a reasonable amount of due diligence fees could be expected (reasonable), an advanced fee that is not for due diligence or just an outrageous amout would be reason to pause and ask many more questions before you send your check!!!

INMHO any fees charged up-front in excess of typical fees such as Appraisal & Inspection (paid directly to vendors) and possibly a Funds Reservation Fee (upon receipt of FIRM Loan Commitment from Lender) are not the signs of a direct HML and may raise questions obout their legitimacy and actual objectives.

Just my $0.02