When you’re moving fast on a real estate deal, a hard money loan can be the edge you need. But speed doesn’t mean skipping due diligence. Whether you’re flipping your first house or scaling a portfolio, asking the right questions upfront can help you avoid costly surprises.
This isn’t about interrogating a lender—it’s about protecting your investment. So before you sign anything, walk through this investor loan checklist and make sure you’re getting clear, confident answers to these seven essential questions.
1. What’s Your Experience Lending on Projects Like Mine?
Not all hard money lenders are created equal. Some specialize in residential flips. Others focus on commercial builds or land deals. Ask directly:
- How many deals have they funded in your property type and market?
- Do they understand local permitting, timelines, and comps?
This first question helps you evaluate whether you’re speaking with a transactional lender—or a true partner who can spot red flags and add value beyond the loan.
Pro tip: A lender who’s been through a few market cycles will often be more disciplined in underwriting, and that’s good for both sides.
2. What Are the True Costs of the Loan?
Interest rate is just the beginning. Ask for a detailed breakdown of:
- Origination fees
- Underwriting or processing fees
- Prepayment penalties
- Extension fees (if your timeline slips)
Some lenders present attractive rates up front, but load the deal with backend fees. You want the full picture. Ask for a sample closing statement if you can.
Remember: Transparency now can save thousands later. A trustworthy lender will welcome this part of the conversation.
3. How Quickly Can You Close—and What Can Delay That?
One of the biggest advantages of a hard money loan is speed. But even the fastest lenders have bottlenecks. Find out:
- How long is their typical time to close?
- What documents or steps usually cause delays?
- Do they fund directly or rely on third-party capital?
If you’re in a competitive bidding situation, days matter. Get clarity on their process and timeline. This should be part of any smart investor loan checklist.
4. What Happens If the Market Shifts or the Exit Takes Longer?
It’s easy to plan for best-case scenarios. But real estate investors know timelines shift, costs creep, and markets cool. So ask:
- Do you allow extensions? Under what terms?
- What happens if I go over term or fall behind on interest payments?
Hard money lenders often underwrite to worst-case scenarios. You should too. A lender who has thought through risk mitigation will have clear answers and flexible (but fair) policies.
5. Do You Require Personal Guarantees or Cross-Collateral?
Here’s a big one investors sometimes overlook:
- Are you putting your own assets at risk beyond the subject property?
Some lenders require personal guarantees, even for experienced investors. Others may cross-collateralize multiple properties in your portfolio. If you’re not comfortable with that, you need to know now.
Clarity around the security structure is non-negotiable. Make sure it fits your risk tolerance and business structure.
6. How Do You Handle Construction Draws or Rehab Budgets?
If your loan includes a construction or renovation component, this is crucial. Ask:
- How are draws disbursed?
- What documentation is required for each stage?
- How long does it take to get reimbursed?
Delays in draws can derail your timeline and rack up holding costs. Look for a lender with a streamlined inspection and reimbursement process—ideally with digital submission options.
And if they’ve never handled a rehab loan before? That’s your cue to keep shopping.
7. What Happens If I Default?
No one wants to think about defaulting—but smart investors plan for it anyway. This is one of the most important questions to ask a hard money lender:
- How do you handle defaults?
- Do you pursue foreclosure immediately, or try to work with the borrower?
- Have you ever worked out a deal with a borrower who hit unexpected issues?
Understanding how the lender handles tough situations tells you a lot about who you’re working with. The best lenders aren’t looking to take your property—they want to help you succeed. But they also protect their capital. You need to understand both sides.
Don’t Skip the Conversation
Hard money loans can be powerful tools—but they’re also high-stakes financial instruments. Before you sign, make sure you’ve walked through every item on your investor loan checklist. If a lender is vague, dodgy, or avoids these conversations? That’s your answer.
A great lender won’t mind the questions. In fact, they’ll appreciate them—because serious investors ask serious questions.
If you’re in the market for a flexible, transparent real estate loan with a lender who welcomes due diligence, Lending Bee is here to help.