How to choose the best hard money lender in Venus

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Hard Money Lender FL Venus

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the value 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 mainly on the worth of the asset used as collateral for the loan. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a short term alternative (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 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 traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single 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 Requires Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be pleased to loan on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan guaranteed by a property in need of repairs is very seldom funded by banks; so the borrower uses a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with conventional funding. 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 lending will be provided by a private lender to the borrower to buy the property and lease it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional financing. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal financing consistently turn down even quality borrowers such as for instance doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Hence, there’s an enormous requirement for private lenders who look at the value of the underlying asset in comparison to 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 ordinarily 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 usually range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 loan amount. The lender will subsequently charge various fees for document preparation by an attorney, evaluation fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without each of the concealed junk fees and costs an extremely low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan earnings.

Will there be a prepayment penalty with hard money loans?

Usually hard money lenders in Venus Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 prepayment fee, 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 so your lender receives a modest 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 fee will be issued.

How fast can a typical hard money loan 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 deal 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 required when applying?

Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.

When completing a fix & flip or rehab job, what will the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will want to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. 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. Yet, hard money lenders focus chiefly on the asset value of the collateral 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 info.

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