Hard Money Lender Florida Valrico 33594
Hard Money Lender FL Valrico
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly 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 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 home.
Why exactly would a person 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 conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund just one 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 generally 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. By way of example, banks really infrequently fund a loan secured by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender payoff the hard money loan with normal lending, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, temporary funding will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time period that is specific, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal funding consistently turn down even quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Consequently, there is a huge requirement for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out 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 taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (4) borrower’s “skin in the game” (sum of cash equity in the property). At Capital Funding Financial we offer the lowest rates around starting at 8.9%*
What are the fees associated with asset based lending?
Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by a lawyer, assessment fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all the rubbish fees that are concealed and costs a very low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from the actual loan proceeds.
Will there be a pre-payment fee with hard money loans?
For example, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for 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 six months, then no prepayment penalty 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when employing?
Yes, hard money loans generally demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing a fix & flip or rehabilitation project, what will 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 tips in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; thus 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 even require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the collateral and not 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.
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Valrico Florida Hard Money Lender