How to choose the best hard money lender in Winter Haven

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Hard Money Lender FL Winter Haven

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a temporary solution (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 someone choose a hard money loan (asset–based loan) over a traditional 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 funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be happy to lend on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, a loan secured by a property in need of repairs is quite infrequently funded by banks before it can be used; so the borrower will use a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short-term funding will be provided by a private lender to the borrower to buy the property and lease it up. Once the property is stabilized for a certain period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers such as doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Therefore, there is certainly an enormous need for private lenders who look the value of the underlying asset in comparison to 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 typically lend out 65% 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 factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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 loan amount. Various fees for file preparation will subsequently charge by a lawyer, financing processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward terms without each of the concealed junk fees

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 of the fees (other than the application fee) are paid in the actual loan earnings.

Is there a pre-payment fee with hard money loans?

By way of example, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives a little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre payment penalty 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 bargain 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 appraisal needed?

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

When finishing flip or rehab project & a repair, what’ll the hard money lender require?

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 information in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; thus the lender will need to see the borrowers experience 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 repairs that are listed. The lender will also require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the collateral and not the credit score.

If you are looking for 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 information.

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