How to choose the best hard money lender in Oakland

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Hard Money Lender FL Oakland

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying collateralized asset. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a temporary alternative (1–3 years commonly) 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 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 cheaper traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance just one 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 generally funded within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be happy to lend on a property that either lacks cash flow or requires physical progress so long as the borrower has enough “skin in the game” (equity). For instance, banks very infrequently fund a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender rehabilitate and to purchase the property, and then payoff 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. Nonetheless, a private lender provides short-term financing to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a particular time period. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers such as doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Hence, there’s an enormous need for private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We usually 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 upon taking a look at a mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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 in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, appraisal fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward conditions without all of the rubbish fees that are concealed

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 (apart from the application fee) are paid from your actual loan earnings.

Is there a prepayment fee with hard money loans?

By way of example, with a 6 pre-payment 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 at least a modest return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after six months, then no pre payment penalty will be issued.

How fast 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when implementing?

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

When completing a fix & flip or rehabilitation job, what’ll 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 timeline and worksheet. The lender will use this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; thus the lender will want to see 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 to be made after each draw is complete. The lender may also require income statement and a credit report in the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the security and never the credit score.

If you are in need of 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.