How to choose the best hard money lender in Cortez

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Hard Money Lender FL Cortez

What is hard money loan?

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

Why exactly would someone pick a hard money loan (asset–based loan) over a traditional loan provided 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 economical conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be pleased to lend on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, banks very seldom finance a loan guaranteed by a property in need of repairs; so the borrower uses a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will provide short term financing to the borrower to buy the property and lease it up. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with normal lending. (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. Thus even quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for conventional financing. Thus, there is an enormous need for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we usually lend out 65% of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

The rate by the lender is determined by looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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 a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by a lawyer, evaluation fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without each of the concealed junk fees and charges a very low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

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

Can there be a pre-payment fee with hard money loans?

For example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so that the lender receives at least a little return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, then no prepayment fee will be issued.

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

At Capital Funding Financial, we’re 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an evaluation needed?

Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. We are a Cortez hard money lender who orders an appraisal that is independent on the subject property.

When completing flip or rehabilitation job & a repair, 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 resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; so the lender will need to see the borrowers experience in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will even require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.

If you are 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 information.