How to choose the best hard money lender in Brandon

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Hard Money Lender FL Brandon

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. 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 worth of the asset used as collateral for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short term alternative (1–3 years typically) 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 conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. However, a personal lender will be happy to loan on a property that either lacks cash flow or needs physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan secured by a property in need of repairs is really seldom funded by banks; therefore the borrower will use a hard money lender settlement the hard money loan with conventional financing, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will give you temporary funding to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a certain period of time. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. Hence, there is certainly a huge need for private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We typically 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 looking at a mix of factors 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” (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?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by a lawyer, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the hidden trash fees and costs a very low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s 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 earnings.

Will there be a prepayment fee with hard money loans?

Usually hard money lenders in Brandon Florida implement a 3–6 month minimum interest condition. For example, with a 6 pre-payment penalty, 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 that the lender receives at least a modest return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no pre-payment penalty will be issued.

How quickly 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 appraisal, 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 implementing is an appraisal needed,?

Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.

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

Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will need to see the borrowers experience in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the collateral rather than the credit score.

If you are 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 advice.

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