How to choose the best hard money lender in Sarasota

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Hard Money Lender FL Sarasota

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the value of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short-term solution (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would a person choose 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 funding or a hard money loan over a more affordable traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual 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 traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a private lender will be happy to give on a property that either lacks cash flow or needs physical advancements so long as the borrower has enough “skin in the game” (equity). For instance, banks quite infrequently finance a loan secured by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender settlement the hard money loan with traditional funding, and then to purchase and rehabilitate 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, an exclusive lender will provide short-term financing to the borrower to buy the property and rent it up. Once the property is stabilized for a particular time frame, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based entirely 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 conventional lending consistently turn down quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there is certainly a huge importance of private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We normally 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?

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 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 a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, assessment fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward conditions without all the crap fees that are concealed

Can the loan fees be paid from your loan proceeds?

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

Will there be a pre-payment fee with hard money loans?

Generally hard money lenders in Sarasota Florida implement a 3–6 month minimum interest condition. For instance, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so the lender receives a little yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, then no pre payment 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 deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an assessment required,?

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

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

Besides the obvious 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 rehab goals. Nothing ever goes as planned when performing a rehab; hence the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. 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. Yet, hard money lenders focus primarily on the asset value of the collateral and never the credit score.

If you’re 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.

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