How to choose the best hard money lender in New Port Richey

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Hard Money Lender FL New Port Richey

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value of the asset that is collateralized 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 primarily on the worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a temporary option (1–3 years usually) 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 choose 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 financing or a hard money loan over a more affordable conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a personal 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). By way of example, a loan secured by a property in need of repairs is quite infrequently funded by banks before it can be used; consequently the borrower will use a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender will provide short-term lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional financing. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence 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 lending. So, there is an enormous importance of private lenders who look the value of the underlying asset when compared with 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 normally 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 dependent on looking at a combination of variables 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” (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?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, appraisal fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all the concealed junk fees and charges an incredibly low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

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

Will there be a pre payment penalty with hard money loans?

Typically hard money lenders in New Port Richey Florida implement a 3–6 month minimum interest condition. For example, with a 6 prepayment penalty, if the borrower were 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 a small yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, then no pre-payment penalty 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 assessment, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an appraisal needed?

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

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will need to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement from 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 collateral rather than the credit score.

If you’re looking for a hard money loan for a rehabilitation, 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 advice.