How to choose the best hard money lender in Winter Haven

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Hard Money Lender FL Winter Haven

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a temporary option (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 pick 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 financing or a hard money loan over a cheaper traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund 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– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, banks very infrequently fund a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender payoff the hard money loan with normal funding, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term financing will be provided by a personal lender to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a specific time period. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers such as for instance doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for normal lending. Therefore, there is certainly an enormous importance of private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we usually 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 taking a look at a mix of variables 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 involved in 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 an attorney, evaluation fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward conditions without each of the concealed junk fees

Can the loan fees be paid from the loan proceeds?

Yes 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 proceeds.

Is there a prepayment penalty with hard money loans?

For instance, with a 6 pre-payment 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 in order for the lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then 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 bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When using is an evaluation required,?

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

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

Well besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection. The lender will also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the collateral rather than the credit score.

If you are 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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