How to find and vet hard money lenders: sources, questions, red flags

Finding a hard money lender is easy; finding a good one is a vetting exercise. The industry has excellent operators and a persistent fringe of advance-fee scammers who look identical online.

Where lenders are found

Local real estate investor associations (REIAs) and meetups — lenders sponsor them, and other investors will tell you who actually funds.
Title and escrow companies that close investor deals see every lender’s paper and know who performs.
Real estate agents and wholesalers who work with flippers.
Mortgage brokers specializing in investor loans, who shop several lenders (for a fee, usually 1 to 2 points).
National platforms and funds with online applications — consistent programs, less flexibility.
County records: search recorded deeds of trust on recently flipped properties to see who lent.

Twelve questions to ask

Are you the direct lender or a broker? Who funds the loan?
Which states do you lend in, and are you licensed where required? (Check NMLS Consumer Access and the state regulator — see our state pages.)
What is your maximum loan-to-cost and loan-to-ARV for my experience level?
Rate, points, and every fee — in a written term sheet?
Does interest accrue on undrawn rehab funds?
How do draws work: number, inspection fee, turnaround?
What is the term, and what do extensions cost?
Is there a prepayment penalty or minimum interest period?
What happens at maturity if my exit is delayed?
How many loans did you fund last quarter, and can I speak to two borrowers?
What are the closing timeline and the third-party reports you require?
What does default interest look like, and what is the personal guarantee’s scope?

Red flags

Upfront fees before a term sheet — “application,” “due diligence” or “commitment” fees of thousands of dollars from a lender you cannot verify. Legitimate lenders collect appraisal and legal costs at or near closing, rarely large sums in advance.
No verifiable address, no recorded loans in any county, a website a few months old, a Gmail address.
Guaranteed approval or 100% financing with no money down.
Pressure to wire quickly or to use their title company only.
Terms that change at closing from the term sheet.
Offshore or “private bank” funding stories requiring you to pay insurance, bonds or transfer fees to release funds.

Check the lender, not just the website

Search the company and principals’ names with “complaint” and “lawsuit”; look for recorded deeds of trust naming them as beneficiary in your county; verify the licensing claim with the state regulator; and call the title company they say they use. Ten minutes of verification prevents the most common loss in this business, which is paying a fee to a lender that never existed.

Frequently asked questions

Should I use a broker?

For a first loan or an unusual deal, a good investor-loan broker earns their fee by matching you with a lender that fits and by pushing paperwork through. For repeat, standard deals, a direct relationship is cheaper.

Are national lenders better than local ones?

National platforms offer consistency and scale; local lenders offer flexibility, market knowledge and faster judgment calls. Many investors keep one of each.

How do I know a term sheet is real?

It names the lender entity, states every fee, is signed by someone you can reach, and is followed by a commitment letter from the same entity. A term sheet from a “facilitator” that names no funding source is a broker’s pitch, not a commitment.