How to choose the best hard money lender in Palatka

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Hard Money Lender FL Palatka

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a temporary 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 conventional loan provided 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 conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance just 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 typically funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be pleased to lend on a property that either lacks cash flow or demands physical advancements 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 quite infrequently funded by banks; so the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with conventional lending. 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 will give you short term lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with normal lending. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Therefore, there is certainly a huge requirement for private lenders who look at 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 capital decision mainly on the LTV (loan to value). We normally 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?

The rate by the lender is determined by looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and location, (4) borrower’s “skin in the game” (amount 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 a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, a loan processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward terms without all the rubbish fees that are hidden

Can the loan fees be paid from your loan proceeds?

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

Is there a prepayment penalty with hard money loans?

Generally hard money lenders in Palatka Florida implement a 3–6 month minimum interest condition. For instance, 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 requirement is put in place so your lender receives a modest yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, then no prepayment fee will be issued.

How fast 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 evaluation, 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.

When employing is an evaluation required,?

Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an independent appraisal at Capital Funding Financial.

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

Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to find the borrowers expertise in managing or performing real estate 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 in the borrower to show 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 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 info.