How to choose the best hard money lender in Ponce De Leon

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Hard Money Lender FL Ponce De Leon

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short term solution (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 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 more affordable conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund 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 commonly funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. For example, banks very seldom finance a loan guaranteed by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will provide short-term financing to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for conventional lending consistently turn down even quality borrowers including doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Thus, there is a huge requirement for private lenders who look more at the value of the underlying asset in comparison with the amount of the loan 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 mix 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 in asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, a loan processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of only 2%* and offers straight forward conditions without each of the hidden rubbish fees

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

Will there be a prepayment fee with hard money loans?

Normally hard money lenders in Ponce De Leon Florida implement a 3–6 month minimum interest prerequisite. For instance, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives at least a little yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, 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 one or two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an assessment required when applying?

Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. We are a Ponce De Leon hard money lender who orders an appraisal that is independent on the subject property.

When finishing flip or rehabilitation job & a fix, what’ll the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; consequently 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 listed repairs and require an inspection. The lender may also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and never the credit score.

If you’re 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 information.

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