How to choose the best hard money lender in Durant

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Hard Money Lender FL Durant

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a temporary solution (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 conventional 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 cheaper conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance an individual family residential loan, any where between 60–90 days to finance 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– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be pleased to give on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan guaranteed by a property in need of repairs is very rarely funded by banks; consequently the borrower uses a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, temporary lending will be provided by an exclusive lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently even quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. So, there is a huge need for private lenders who look more at 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 ordinarily lend 65% out 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 taking a look at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and location, (4) borrower’s “skin in the game” (amount 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 with asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, a loan processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without each of the rubbish fees that are concealed and costs a very low origination fee of merely 2%*

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 all the fees (other than the application fee) are paid in the actual loan earnings.

Will there be a prepayment fee with hard money loans?

For instance, 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 in order for the lender receives at least a modest yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no pre-payment fee will be issued.

How fast can a typical hard money loan 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 assessment, title commitment). The typical deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an appraisal needed?

Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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

Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the security and not the credit score.

If you are in need of 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.