Best hard money loan in Pensacola

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Hard Money Loan Florida Pensacola

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus primarily 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 security for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short term alternative (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 a person choose a hard money loan (asset–based loan) over a conventional loan provided by a bank with lower rates?

There are many reasons why a borrower would choose to use private financing or a hard money loan over a more economical traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance 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 generally financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. However, a personal lender will be pleased to lend on a property that either lacks cash flow or requires physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan secured by a property in need of repairs is quite rarely funded by banks; consequently the borrower uses a hard money lender settlement the hard money loan with traditional funding, and then to purchase 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 financing 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 certain period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for normal funding consistently turn down quality borrowers like doctors, lawyers, and attorneys who have high incomes but also have lots of debt. Hence, there is certainly an enormous importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we usually lend 65% out 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 variables for example: (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 in Pensacola charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, an application fee, appraisal fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without all the hidden junk fees and charges a very low origination fee of merely 2%*

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 (besides the application fee) are paid from your actual loan proceeds.

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

For instance, 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 requirement is put in place so that the lender receives at least a little yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no prepayment penalty will be issued.

How quickly 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical price 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 needed when applying?

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

When completing a repair & flip or rehabilitation project, 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 worksheet and timeline. The lender uses this as helpful information in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to see the borrowers expertise in performing or managing property 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 from the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral and not 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 information.