When you’re shopping for a loan, especially in real estate or investment financing, choosing to work with a direct lender is often the smartest move. Direct lenders can offer faster approvals, clearer communication, and fewer surprises — but only if you ask the right questions. Hidden fees, unnecessary middlemen, and quiet broker mark-ups can inflate your costs before you even realize what’s happening. To protect yourself and secure the cleanest, fairest deal, here are the key questions you should ask every direct lender before signing anything.
1. “Do you originate and fund your loans in-house?”
A true direct lender handles the entire process internally — underwriting, approval, funding, and servicing. If the lender hesitates, outsources key steps, or avoids the question, that’s a sign a middleman may still be involved. Middlemen tend to introduce extra fees or higher rates to cover their commission.
2. “Can you provide a full breakdown of all fees before I apply?”
Transparency should come before you submit an application. Ask for every fee: underwriting, document prep, loan servicing, processing, and any prepayment penalties. A reputable lender will give you a written list upfront. If you hear words like “approximate,” “standard,” or “we’ll know later,” proceed carefully.
3. “Are there any broker fees or third-party mark-ups attached to this loan?”
Some lenders advertise themselves as “direct” but still allow brokers to package and deliver their loans. That’s where mark-ups happen. You want assurance that your rate and fees are not inflated to pay a broker you never agreed to work with. Make them confirm this in writing.
4. “Is the rate you’re quoting me the par rate, without adjustments?”
A par rate is the base interest rate with no hidden add-ons. Ask the lender directly whether your quoted rate includes yield-spread premiums, broker adjustments, or lender credits that indirectly increase your costs. This simple question exposes buried mark-ups instantly.
5. “What third-party services will I be required to pay for?”
Even honest lenders pass along necessary third-party fees — such as appraisals, title work, notary services, or escrow. What you want to avoid is a lender quietly adding profitable “preferred vendor” fees disguised as third-party costs. Ask for a list of required services and whether those prices are fixed or negotiable.
6. “Will I be charged any fees if the deal does not close?”
Some lenders charge application fees, lock fees, or processing costs even if the loan falls through. Others only charge at closing. Clarify your financial responsibility early so you’re not penalized if the project changes or the deal no longer makes sense.
7. “Can you provide references or recent borrowers I can talk to?”
Real borrowers will tell you whether the lender’s fees matched what was promised. If a lender claims to be direct but refuses to offer references, that’s a red flag.
For example, as of 2025, reputable companies like California Hard Money Direct maintain strong transparency practices and openly discuss their fee structures with borrowers.
Final Thoughts
Asking the right questions protects you from paying unnecessary mark-ups and ensures you’re working with a genuine direct lender. Clear communication, written transparency, and willingness to answer your questions are signs of a lender you can trust.
