How to choose the best hard money lender in Brooksville

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Hard Money Lender FL Brooksville

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short-term option (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would a person pick a hard money loan (asset–based loan) over a traditional loan offered by a bank with lower rates?

There are many reasons why a borrower would choose to use private funding or a hard money loan over a more affordable traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, a loan secured by a property in need of repairs is very seldom funded by banks; therefore the borrower uses a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary lending will be provided by a private lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional lending consistently turn down even quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. So, there is certainly a huge requirement for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we typically lend 65% out of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (4) borrower’s “skin in the game” (sum of cash equity in the property). At Capital Funding Financial we offer the lowest rates around starting at 8.9%*

What are the fees involved in asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of only 2%* and offers straight forward conditions without all the trash fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes there is a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from your actual loan earnings.

Will there be a prepayment penalty with hard money loans?

By way of example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives a modest yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee will be issued.

How fast can a hard money loan that is typical close?

At Capital Funding Financial, we are a direct lender and have the ability to close loans within a few days when given a complete loan package (credit report, income documentation, independent evaluation, title commitment). The typical bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an assessment needed?

Yes, hard money loans usually need an appraisal, broker price opinion, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.

When finishing flip or rehab project & a fix, what will the hard money lender require?

Well besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; so the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the security rather than the credit score.

If you’re looking for a hard money loan for a rehab, fix & flip, or investment purpose, contact us today at 954-320-0242 or toll free at 1–866–695–0092 or visit Hard Money Loan for more info.

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