How to choose the best hard money lender in Lawtey

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Hard Money Lender FL Lawtey

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary alternative (1–3 years commonly) 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 pick 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 funding: (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 finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, banks quite rarely fund a loan secured by a property in need of repairs; therefore the borrower uses a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary financing will be provided by an exclusive lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a particular time period, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So traditional banks for normal funding consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. So, there’s a huge requirement for private lenders who look more at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We generally 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 usually 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 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?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by an attorney, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward provisions without all of the concealed crap fees

Can the loan fees be paid from your loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid in the actual loan earnings.

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

For example, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so that the lender receives a small return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no prepayment fee will be issued.

How fast can a typical hard money loan 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 evaluation, title commitment). The typical bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an appraisal needed,?

Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. We order an independent appraisal.

When completing a fix & flip or rehabilitation job, what’ll the hard money lender require?

Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to see the borrowers expertise in managing or performing 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 will also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral and never the credit score.

If you’re 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 info.

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