How to choose the best hard money lender in Orlando

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Hard Money Lender FL Orlando

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the asset that is collateralized that is underlying. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short-term alternative (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 a person choose 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 funding or a hard money loan over a cheaper traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 typically financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For 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 uses a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender provides short-term funding to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain time period, the hard money loan will be refinanced by a commercial lender with conventional lending. (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. Hence even quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Hence, there’s an enormous need for private lenders who look at the value of the underlying asset in comparison 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 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 dependent on looking at a combination of variables for example: (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?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by a lawyer, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of merely 2%* and offers straight forward provisions without all of the hidden trash fees

Can the loan fees be paid from your loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid in the actual loan earnings.

Is there a pre payment penalty with hard money loans?

Normally hard money lenders in Orlando Florida implement a 3–6 month minimum interest condition. For instance, 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 condition is put in place in order for 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 half a year, subsequently no pre payment fee will be issued.

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

Is an evaluation needed when applying?

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

When completing flip or rehab project & a fix, what’ll the hard money lender require?

Besides the obvious 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 tips in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection. 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. Nonetheless, hard money lenders focus mostly on the asset value of the collateral and not the credit score.

If you are 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 information.

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