How to choose the best hard money lender in Palatka

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Hard Money Lender FL Palatka

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short-term solution (1–3 years typically) 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 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 traditional financing: (1) Quick Funding– traditional banks take the absolute 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 fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a personal lender will be happy to loan on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, a loan guaranteed by a property in need of repairs is quite infrequently funded by banks before it can be used; therefore the borrower will use a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short-term lending will be provided by a private lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for normal funding consistently turn down even quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. Consequently, there’s an enormous requirement 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. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of factors for example: (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 loan amount. The lender will then charge various fees for document preparation by a lawyer, assessment fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the hidden junk fees and costs a very low origination fee of just 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 each of the fees (besides the application fee) are paid from your actual loan proceeds.

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

For instance, with a 6 pre payment fee, 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 that the lender receives at least a small yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, then no prepayment fee will be issued.

How quickly can a hard money loan that is typical 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 appraisal, title commitment). The typical bargain takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an evaluation required,?

Yes, hard money loans generally require an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we are a Palatka hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will want to see the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement in the borrower showing 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’re 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 advice.

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