How to choose the best hard money lender in Saint Petersburg

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Hard Money Lender FL Saint Petersburg

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 collateralized asset that is underlying. Traditional banks and lenders focus mainly on income and the credit 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 normally for 15–20 year periods, hard money loans are used as a temporary solution (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 a person pick 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 funding or a hard money loan over a more economical conventional funding: (1) Quick Funding– traditional 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 typically funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for instance, a loan secured by a property in need of repairs is very seldom funded by banks; hence the borrower uses a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, an exclusive lender will give you short term financing to the borrower to purchase the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a certain time frame. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. Hence, there is an enormous requirement for private lenders who look 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 funding decision primarily on the LTV (loan to value). 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?

Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination of factors such as: (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?

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

Can the loan fees be paid from your loan proceeds?

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

Can there be a pre-payment penalty with hard money loans?

For instance, with a 6 prepayment penalty, if the borrower should happen 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 small yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment fee 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 price takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an evaluation needed,?

Yes, hard money loans usually demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.

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

Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to see 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 will 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 largely on the asset value of the security rather than the credit score.

If you’re looking for 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 advice.