How to choose the best hard money lender in Fort Myers Beach

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Hard Money Lender FL Fort Myers Beach

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a temporary option (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would someone 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 financing or a hard money loan over a more affordable conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund a single 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 generally funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, banks very rarely fund a loan secured by a property in need of repairs; consequently the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender provides short-term financing to the borrower to buy the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific time frame. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So even quality borrowers such as doctors, lawyers, and attorneys who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. Therefore, there’s an enormous requirement for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 taking a look 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 with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, assessment fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all of the concealed crap fees and costs an extremely low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan proceeds.

Is there a prepayment fee with hard money loans?

For instance, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place in order for the lender receives a small yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, then no pre-payment penalty will be issued.

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

When implementing is an assessment required?

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

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

Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security rather than the credit score.

If you’re 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 information.