How to choose the best hard money lender in Boca Raton

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Hard Money Lender FL Boca Raton

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the value of the asset that is collateralized 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 used as collateral for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short term 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 dwelling.

Why exactly would someone choose a hard money loan (asset–based loan) over a conventional loan offered by a bank with lower rates?

There are many reasons why a borrower would choose to use private financing or a hard money loan over a more economical conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance a single family residential loan, any where between 60–90 days to finance 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 Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be happy to give on a property that either lacks cash flow or demands physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks; consequently the borrower will use a hard money lender rehabilitate and to buy the property, and then settlement 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. Yet, temporary lending will be provided by an exclusive lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a specific time period, 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 greatly on a borrower’s credit score, previous income, and ability to repay the debt. So traditional banks for normal funding consistently turn down even quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. Consequently, there’s a huge need for private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we normally 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 dependent on taking a look at a combination 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” (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 with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, an application fee, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without each of the trash fees that are hidden and charges a very low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

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

Will there be a prepayment penalty with hard money loans?

By way of example, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place in order for the lender receives a little yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, then 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 price takes about one to two 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 usually need an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we are a Boca Raton hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the apparent 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 helpful information in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehab; thus the lender will want to find the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws. 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. Nevertheless, hard money lenders focus mostly on the asset value of the security rather than the credit score.

If you are 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.