When investors shop for hard money loans in California, they often focus on the interest rate first. But the smartest borrowers know the real value lies in the structure, transparency, and performance of the lender—not just their quote.

The right questions help you spot red flags early, understand real timelines, and protect your returns. Whether you’re flipping a home in Orange County or refinancing a rental in San Diego, asking the right questions before signing will save you stress and money.

Here are the top questions every California investor should ask before borrowing from a private lender.

1. How Long Have You Been Lending in California?

California’s lending laws are stricter than most states. A legitimate lender should be licensed under the California Financing Law (CFL) or operate under a California Bureau of Real Estate (CalBRE) license.

Ask:

  • Are you licensed by the DFPI (Department of Financial Protection and Innovation) or CalBRE?
  • Can you show proof of active license and NMLS ID?
  • How many California loans have you closed in the past 12 months?

Why It Matters:

California has unique consumer protection, usury, and foreclosure laws. A licensed local lender knows how to navigate them and won’t risk structuring a deal that’s noncompliant.

2. What Is Your Average Closing Time?

Speed is a major reason investors turn to private money—but “fast” means different things depending on the lender.

Ask:

  • What’s your average timeline from application to funding?
  • What documents do you need upfront to meet that timeline?
  • What’s the fastest deal you’ve closed recently in California?

Why It Matters:

Some lenders advertise “7-day closings” but rely on outside capital or brokers, which can delay funding. Direct, well-capitalized lenders (like Lending Bee) usually fund faster because they underwrite in-house.

3. Who Services the Loan After Closing?

Many borrowers assume their lender will stay with them throughout the term—only to find the loan gets sold or serviced elsewhere.

Ask:

  • Do you service loans in-house or sell them after closing?
  • Who should I contact for draw requests, extensions, or payoffs?

Why It Matters:

In-house servicing means consistent communication and faster responses for things like construction draws or payoff letters. If the lender sells servicing, ask for clear contact details and escalation channels.

4. What Is the Loan-to-Value (LTV) Limit—and Is It Based on As-Is or ARV?

This question defines how much leverage you’ll really get.

Ask:

  • What’s your maximum LTV or LTC (loan-to-cost)?
  • Do you calculate it from the as-is value or after-repair value (ARV)?

Why It Matters:

Some lenders lend up to 75% of ARV, while others only use as-is. The difference can determine whether your project pencils out—or if you’ll need to bring more cash to closing.

5. What Fees Should I Expect Besides Points and Interest?

Every lender structures costs differently. The APR isn’t the full story.

Ask:

  • What processing, underwriting, or doc fees apply?
  • Are there any draw, wire, or reconveyance fees later?
  • Is there an extension or prepayment fee?

Why It Matters:

Hidden backend fees can eat into profits, especially for short-term loans. Always ask for an itemized fee sheet before signing your term sheet.

6. What Are Your Draw and Inspection Procedures?

For rehab or construction loans, funding speed after each milestone is critical.

Ask:

  • How fast are draws processed after inspection?
  • Are inspections handled by third-party vendors or internal staff?
  • Do you reimburse expenses or pre-fund draws?

Why It Matters:

Delays in draws can stall your project, increase holding costs, and hurt contractor relationships. Choose a lender with a transparent, fast draw schedule (ideally within 3–5 business days).

7. What Happens If My Project Timeline Changes?

Delays happen—permits, materials, weather, or city inspections can all slow things down.

Ask:

  • What’s the extension policy if I need more time?
  • How many extensions are allowed, and what do they cost?
  • How far in advance do I need to request one?

Why It Matters:

Lenders that offer clear, predictable extension terms (like 0.5–1 point per month) help you stay in control without last-minute surprises.

8. What Is the Exit Strategy You Expect to See?

Every good private lender underwrites the exit, not just the property.

Ask:

  • Which exit strategies do you typically fund—fix and flip, refinance, bridge to DSCR?
  • What documentation do you need to verify my plan (e.g., refi pre-approval, sales comps)?

Why It Matters:

A lender aligned with your exit plan will structure the term, payment schedule, and holdback more strategically—reducing risk on both sides.

9. What Are My Prepayment and Refinance Options?

Hard money loans are short-term by design, but you shouldn’t get punished for paying early.

Ask:

  • Is there a minimum interest period or prepayment penalty?
  • If I refinance with a long-term lender, what notice do you need?

Why It Matters:

Transparent lenders won’t lock you into unnecessary interest. Some even waive prepayment penalties if you refinance with their approved partners.

10. How Do You Handle Title, Taxes, and Insurance?

These are the quiet killers of profit if not handled properly.

Ask:

  • Will you impound property taxes or insurance?
  • What’s the process for verifying hazard or builder’s risk coverage?
  • How do you monitor for delinquent tax liens?

Why It Matters:

In California, property tax liens are senior to your lender’s deed of trust. Responsible lenders will ensure they’re always current to protect both parties.

11. Can You Provide References or Sample Closings?

A reputable lender should have a track record they’re proud to show.

Ask:

  • Can I speak with past borrowers or brokers you’ve funded in California?
  • Do you have examples of recent deals similar to mine?

Why It Matters:

Real-world proof is the ultimate due diligence. Any hesitation here is a red flag.

12. What’s Your Policy on Communication?

You don’t want to chase your lender for updates.

Ask:

  • Who’s my main point of contact—underwriter, loan officer, or servicer?
  • How quickly do you respond to calls or emails?

Why It Matters:

Real estate moves fast. A lender who goes quiet for days can cost you deals.

Bonus Tip: Test Before You Trust

Send your lender a sample scenario—property value, loan amount, exit plan—and see how they respond. A seasoned private lender should provide clear feedback on loan structure, risk, and timeline within a day or two.

Checklist: The Smart Borrower’s Quick Test

✅ Verify DFPI or CalBRE license
✅ Request proof of funds or recent closings
✅ Compare total cost, not just rate
✅ Ask about in-house servicing
✅ Confirm extension and prepayment terms
✅ Review communication and funding timeline
✅ Get everything in writing

Why These Questions Build Better Deals

In California’s competitive markets—Los Angeles, San Diego, Orange County—speed matters, but clarity and trust matter more. The best private lenders, like Lending Bee, welcome tough questions because they value transparency.

The more you understand the structure behind your loan, the better you can predict costs, manage cash flow, and build lasting partnerships that grow your investment business.