How to find a good hard money lender in Pennsylvania

In this blog we’ll provide you with all the information needed to make a smart decision about how to find a good hard money lender in Pennsylvania, from what questions to ask and more. This information will save you time and money.

Should you choose a local or national hard money lender?

The answer usually depends on your specific situation. Let’s look at the pros and cons.


Here are the benefits of working with a local hard money lender:

  • Since real estate investing is a local business, a company that is local will most likely be intimately familiar with the neighborhood of the subject property. A local lender can provide additional insight and valuable data to help with the project.

  • Local and regional lenders are generally focused on good customer service. They are looking to build relationships and work with borrowers for the long term. It won’t be a 1-800 call center phone number.

  • Local lenders tend to have faster construction draw processing times. A national lender may use a national construction loan management company. Those companies tend to be slower.

  • You may feel more comfortable working with someone you’ve met in person.

  • A local company will be familiar with local ordinances, compliance, and tax law, which may be relevant to your project.

On the flip side, it may not be as beneficial for the following reasons:

  • National lenders may be able to offer better loan terms due to economies of scale.

  • By restricting your search to only local candidates, you may be ruling out lenders who are more skilled and knowledgeable or who are a better fit for your personal situation.

  • Technologies such as DocuSign, Zoom, etc., have made virtual relationships much easier. Firms that embrace technology and can accommodate out-of-area clients may be more efficient.

At the end of the day, what matters most is the trust you have in the lender, who they are, and how they conduct their business. We have worked with borrowers in our local area as well as across the East Coast and Midwest, and we have found that what matters most to our borrowers is getting the right fit.

It’s important that you pick a lender that is knowledgeable about the market you plan to enter.

What common characteristics do the best hard money lenders share?

What makes a good hard money lender? Of course, loan terms are important. But every lender has terms. We see these three main tenets that separate the best hard money lenders from the rest.

#1 Is the hard money lender a direct lender?
This is a big one. Many hard money lenders out there today don’t have their own capital and are not the decision makers. In many cases, they are loan brokers or originators who sell the loan minutes after the close. When dealing with a middleperson, inefficiencies may occur. Also, the loan could be problematic because any commitments that are made with respect to timing and funding are not within their control.

A direct lender will be able to make decisions quicker and ultimately close faster since they have their own capital and make decisions in house. You want to be dealing directly with the decisions makers.

#2 Communication
A hard money lender should be viewed differently than a traditional bank lender. They should be responsive to your questions and concerns. A great lender will also function as an advisor and should view borrowers as long-term clients. Possibly, clients for life. Communication is the linchpin that holds borrowers and lenders together

#3 Speed and Simplicity
The primary benefit of a hard money loan is that it’s quick. Borrowers shouldn’t be concerned with a lengthy application and underwriting process that is common with a traditional bank loan. If your hard money lender is asking for mounds of paperwork and is slow to respond, it is likely not the best choice. A hard money loan should be briefly. The top lenders will have an efficient process and will close quickly.

Questions to ask a hard money lender

When you meet with a hard money lender, it’s important to make sure you get the information you need. Here are some questions to ask, whether you are looking for a lender in Pennsylvania, PA, or any location in the United States.

  • Are you a direct lender or will you broker or sell this loan to another company?

  • What are the origination points and interest rate?

  • Are there any other costs involved?

  • What is the maximum loan-to-value (LTV) you offer?

  • Are you willing to provide a term sheet with specific loan terms upfront?

  • For construction loans, what is the draw process and how fast do you execute the draw?

  • How quickly can you approve and close a loan?

  • Is there a prepayment penalty?

  • Do you charge Dutch or non-Dutch interest (interest charged on only what funds are drawn)?

  • How quickly can I reach you by phone or email?

As you can see, there is quite a bit of information to gather. Any hard money lender who doesn’t provide clear and concise information should be eliminated entirely from consideration.

Conclusion

There are many reasons why hard money loans are a good funding choice for real estate investors today. With benefits like fast approvals, quick closings, flexible terms, it is no surprise that these types of loans are becoming more popular with real estate investors. The key to success using this funding strategy is to choose the right lender and utilize the information above to assess if they are a good fit.

We are a hard money lender in the Bucks County, PA area, but we work with borrowers in many other states. We are a direct lender and can generally close in two weeks. We offer speed, effective communication, and expertise. If you would like to discuss a relationship, contact us.

Griffin Haviken