A hard money loan can save a deal, but the wrong lender can sink it. Delays at the last minute, surprise fees and unclear terms cost investors more than a slightly higher rate ever will. Because hard money is a fast, private market, you have to do your own due diligence. This guide gives you nine checks and a short list of red flags to use before you send any money or sign any paperwork.
Short answer: Confirm who actually funds the loan, verify licensing, get all fees and terms in writing before you pay anything, understand the draw and payoff process, and walk away from guarantees and upfront-fee demands. The checks below show how.
What should you check first when comparing lenders?
Start with the basics: who the lender is, who funds the loan and what the full cost will be. When you compare hard money lenders in Texas, you will see some that lend their own capital and others that broker your loan to private investors. Neither model is automatically better, but the difference affects speed, communication and who you hold accountable. Ask each lender to put its answers in writing so you can compare them side by side.
9 Due-Diligence Checks Before You Sign
1. Is this a direct lender or a broker?
Lantzman Lending, a San Diego-based lender, says it is a direct lender and that the money it uses to fund loans is its own and is readily available. Whichever company you consider, ask who funds the loan, who services it and who you contact after closing. A broker can be perfectly legitimate, but you need to know who makes the final decision.
2. Is the lender licensed for your state and loan type?
Lenders must register where they do business, and the Federal Trade Commission’s advance-fee loan guidance advises checking with your state attorney general or banking regulator to confirm. Ask the lender which license covers your specific loan, then verify it with the state agency or the NMLS Consumer Access database. Lantzman Lending’s own disclosures say it is licensed in California, Nevada and Idaho, and that loans made or arranged outside California or Nevada must be represented by a mortgage broker qualified in that state. Disclosures like that are exactly what you should ask any lender to explain.
3. Are all fees disclosed before you pay anything?
Ask for a written term sheet that lists the interest rate, origination fees, appraisal or valuation costs, legal and title costs, and any extension or exit fees. Lantzman Lending says its origination fees vary with the length of the term and that it does not charge junk fees. Be careful about the difference between a normal fee and a red flag. The FTC notes that real lenders can require an application or appraisal fee before considering a loan, but no legitimate lender will tell you that paying a fee guarantees you will get the loan.
4. What are the leverage, term and prepayment rules?
Ask what percentage of the purchase price, rehab cost and after-repair value the lender will finance, and which limit controls. Ask about the loan term, extension options and prepayment penalties. Compare lenders on the same set of numbers rather than the headline rate.
5. How does the rehab draw process work?
If the loan includes renovation funds, ask how and when money is released. Find out whether inspections are required, how long a draw request takes to process and whether there are fees per draw. Slow draws can stall a renovation as surely as a slow closing.
6. What is the realistic closing timeline?
Speed is the reason to use hard money, so ask for specifics. Lantzman Lending says its average closing is 5 to 7 business days, and as little as 3 days when it has all documents. Ask any lender what could delay closing and what you must supply to avoid it.
7. What documents and underwriting will the lender require?
Ask what the lender reviews. The company says it focuses primarily on collateral but also looks at ability to repay, cash reserves and experience. A clear underwriting process is a sign of a serious lender.
8. Can the lender show a track record in your market?
Ask for references and examples of recently closed loans similar to yours, ideally in your market. Speak to past borrowers if you can. A lender that cannot point to relevant experience may not understand local conditions.
9. What do independent reviews and complaints say?
The FTC recommends searching the company’s name with words such as “review,” “complaint” or “scam.” Check Google and other review sites, and look for patterns rather than single comments.
Quick comparison: green flags and red flags
| Check | Green flag | Red flag |
|---|---|---|
| Funding | Clear about who funds and services the loan | Vague about who makes the decision |
| Licensing | Names the license and lets you verify it | Cannot explain which license covers your loan |
| Fees | Written term sheet with all costs | Fees that appear only at closing |
| Approval | Reviews the property and your information | Promises approval before reviewing anything |
| Payment | Funds move through title or escrow | Asks you to pay an individual or wire money to an unknown party |
| Pressure | Gives you time to compare | Demands an immediate decision |
Which red flags should make you walk away?
The FTC lists several warning signs that apply to hard money as much as to consumer loans. Be wary of any lender that guarantees approval before you apply, asks for upfront fees described as “processing,” “insurance” or “paperwork,” or contacts you unsolicited with a loan offer. Do not pay an individual directly, and confirm any wire instructions with the title or escrow company using a phone number you have verified yourself.
Where is Lantzman Lending located?
Lantzman Lending’s main office is at 11696 Sorrento Valley Rd, Suite 201, San Diego, CA 92121, and it also lists an office in Las Vegas. You can call 858-720-0229.
Frequently asked questions
How do I know if a hard money lender is legitimate?
Verify its license with the relevant state agency, read independent reviews, ask for a written term sheet and never pay a fee that is described as a guarantee of approval.
Can a real lender charge a fee before closing?
Yes. The FTC says real lenders can require an application or appraisal fee, but a legitimate lender will not promise a loan in exchange for a fee.
Is the lowest rate always the best deal?
No. Fees, leverage, extension costs and the lender’s reliability can matter more than the headline rate.
Before you sign
Write down your answers to the nine checks for every lender you consider, compare them side by side and take your time. A good lender will welcome the questions, and the answers will tell you who to trust with your deal.
