How to choose the best hard money lender in Orlando

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Hard Money Lender FL Orlando

What’s 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 income and the credit 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 usually for 15–20 year terms, hard money loans are used as a short term 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 dwelling.

Why exactly would someone pick 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 cheaper conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance a single 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– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be happy to loan on a property that either lacks cash flow or demands physical progress 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; hence the borrower uses a hard money lender to buy 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. Yet, temporary funding will be provided by a personal lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal financing once the property is stabilized for a specific period of time. (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. Hence traditional banks for normal financing consistently turn down quality borrowers for example doctors, lawyers, and solicitors who’ve 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 when compared 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 generally look for a 50% – 65% LTV in our loans. What that means is we ordinarily lend 65% out 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 taking a look at a mix 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” (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?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, an application fee, evaluation fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial charges an extremely low origination fee of only 2%* and offers straight forward conditions without all of the hidden junk fees

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

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

For instance, with a 6 pre payment 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 at least a modest return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no pre payment fee 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 assessment, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an assessment needed?

Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. We are a Orlando hard money lender who orders an appraisal that is independent on the subject property.

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

Well besides the obvious 35–40% equity cushion, the lender will want to see the range 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 rehabilitation; thus the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender will even require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security and not 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.