Questions To Ask A Private Money Lender

June 25, 2025Private Lending,

When you’re looking to finance an investment property with a hard money loan, you’ll want to know what to expect from the process and how to choose the right lender. This type of loan is designed to provide quick access to funding, and knowing what questions to ask your hard money lender can save you time, money, and future headaches.

What Documents Are Needed for a Hard Money Loan?

Knowing what documents are needed upfront is a key part of preparing for a hard money loan. Most private lenders, including Ternus, require:

  • Proof of funds
  • Property valuation reports
  • Project plans
  • Borrower identification

Each lender may have slightly different requirements, so it’s important to ask for a full list of required documentation to ensure you can complete the application process quickly.

What Percentage of the ARV Is Leant Out?

For investment property loans, it’s common for lenders to offer up to 70% of the property’s After Repair Value (ARV). The exact percentage varies based on factors like the property’s condition and the borrower’s creditworthiness, as well as the quality of the renovation plan. Depending on the lender, they may disburse the loan funds in stages as the renovation progresses, with payments tied to completion of specific repair milestones.

What Is the Interest Rate and How Is It Calculated?

The actual percentage depends on several factors: the lender, property type, borrower’s experience, deal risk, and market conditions all influence the rate.

What Are All the Fees for a Hard Money Loan?

In addition to interest, most hard money loans include various fees, such as:

  • Origination fee
  • Underwriting fee
  • Processing fee
  • Appraisal/valuation fee
  • Title and escrow fees
  • Property insurance
  • Legal fees

Some projects in flood-prone areas may also require flood insurance. Ask your lender for a complete list of fees so you’re fully informed.

How Much Equity Will You Need?

Hard money loans usually require a down payment as percentage of the purchase price or after-repair value (ARV), depending on the lender’s structure.

Does the Loan Require a Repair Escrow?

Some investment properties need extensive repairs, and lenders may require a repair escrow to protect their interests. This is a separate fund held by the lender to cover necessary repairs. If your project needs a repair escrow, ask whether it covers the entire cost of repairs or only a portion.

Does Interest Accrue on Money Held in the Repair Escrow?

Typically, interest does not accrue on funds held in repair escrow until they’re drawn for specific repairs. This means you’ll only pay interest on the amount you actually use for the project, saving you money on unused funds. Confirm this with your lender so you can avoid unexpected interest costs.

How Quickly Will I Receive Funds from the Repair Escrow?

A “draw process” allows you to access funds from the repair escrow as repairs progress. This involves submitting proof of completed work, like invoices or inspection reports, after each repair phase. Different lenders have different timelines for approving these draws, so make sure you know how long it takes.

When Are the Points and Fees Paid?

Points do not usually “buy down” the interest rate like in a traditional mortgage. Instead, they are more often a standard fee to originate the loan, and the rate is typically fixed regardless of points paid.

How Fast Can the Deal Be Funded and Closed?

Private lenders are known for their fast approval process, often funding deals within a few days to a week. If your project has a tight timeline, knowing the funding speed is crucial. Some private lenders can even expedite the process to close in as few as 10 business days. At Ternus, we can close your deal in as little as 1–2 days, getting you the funds you need without delays.

Is There a Minimum Loan Term?

Hard money loans typically have terms from six months to two years. Some lenders impose a prepayment penalty if you pay off the loan early. If you plan to flip and sell the property quickly, ask if there’s a prepayment penalty to avoid unexpected fees.

Is There a Maximum Loan Term?

Maximum loan terms usually range from 3 to 36 months, though some fix-and-flip lenders offer up to 5 years. If you think you’ll need more time, ask if extensions are available and what additional fees may apply.

When Are Interest Payments Due?

Most hard money loans use an interest-only payment structure, meaning you pay only the interest each month, with the principal due at the loan’s end. Some loans also require property tax escrow payments. Confirming these details can help you budget more accurately.

What Properties Do You Not Lend On?

Every hard money lender has specific property types they finance. At Ternus Lending, we finance residential properties with 1–4 units but do not fund multi-family unit properties, commercial properties, manufactured homes, raw land, or rural properties.

What Is Required in Order to Close on a Deal?

To close a hard money loan, you’ll generally need:

  • A signed purchase contract
  • Property photos
  • Repair estimates
  • A title report
  • Proof of insurance

Get Started With Ternus Today

Whether you’re considering fix-and-flip loans, rental property loans, or another real estate investment strategy, asking the right hard money lender questions is key to success. At Ternus Lending, we provide straightforward answers and quick funding to support your projects. Our loan programs include:

  • Fix-and-flip loans
  • Bridge loans
  • Wholetail loans
  • DSCR loans
  • Transactional funding

Reach out today to learn more about how Ternus can help you achieve your investment goals.

*Rates and terms may be subject to change.