How to choose the best hard money lender in Dover

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Hard Money Lender FL Dover

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the worth 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 being used as collateral for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short term option (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would someone pick 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 funding or a hard money loan over a more economical traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance 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 commonly funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a private lender will be pleased to give on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). As an example, a loan secured by a property in need of repairs is quite rarely funded by banks before it can be used; so the borrower will use a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender provides temporary financing to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a certain time period, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for conventional lending consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Hence, there is certainly an enormous requirement for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we generally 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 typically 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 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?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, a loan processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the concealed crap fees and charges an extremely low origination fee of merely 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 all of the fees (other than the application fee) are paid in the actual loan earnings.

Will there be a prepayment penalty with hard money loans?

For example, with a 6 prepayment penalty, if the borrower should happen 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 a modest return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no pre-payment penalty 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 one to two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when employing?

Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.

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

Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehab; thus the lender will want to see the borrowers experience 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 even 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 collateral and never the credit score.

If you are in need of 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 information.