How to choose the best hard money lender in The Villages

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Hard Money Lender FL The Villages

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying asset that is collateralized. 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 worth of the asset used as collateral for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a short term solution (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 someone pick 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 more affordable traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For instance, a loan secured by a property in need of repairs is really seldom funded by banks before it can be used; hence the borrower will use a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short term financing will be provided by an exclusive lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a certain time period, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently even quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional funding. Hence, there is certainly 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 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 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 with asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, a loan processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without each of the concealed crap fees and costs an extremely low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a big enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from your actual loan earnings.

Can there be a pre payment fee with hard money loans?

For instance, with a 6 prepayment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives a modest return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre payment penalty will be issued.

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

When applying is an appraisal required?

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

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

Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender may also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the collateral rather than 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.

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