How to choose the best hard money lender in Orlando

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Hard Money Lender FL Orlando

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 collateralized asset that is underlying. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year terms, 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 dwelling.

Why exactly would someone choose a hard money loan (asset–based loan) over a conventional 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 more economical traditional funding: (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 finance 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 Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be happy to lend on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks really seldom fund a loan guaranteed by a property in need of repairs; so the borrower uses a hard money lender then, and to purchase and rehabilitate the property payoff 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. Nevertheless, a private lender will give you short term funding to the borrower to buy the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a certain time frame. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for normal financing consistently turn down even quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Therefore, there is certainly a huge 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. We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 generally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix of variables such as: (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 loan amount. Various fees for file preparation will then charge by a lawyer, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the concealed trash fees and charges an incredibly low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from your actual loan proceeds.

Can there be a pre-payment penalty with hard money loans?

Ordinarily hard money lenders in Orlando Florida implement a 3–6 month minimum interest requirement. For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so the lender receives at least a modest 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 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 a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

Is an assessment required when employing?

Yes, hard money loans generally demand an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we are a Orlando hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security and never 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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