How to choose the best hard money lender in Saint Petersburg

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Hard Money Lender FL Saint Petersburg

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset that is underlying. Traditional banks and lenders focus mostly on income and the credit 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 traditional loans are usually for 15–20 year terms, 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 a person 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 the absolute minimum of 45 days to fund one 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 financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be happy to loan on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan guaranteed by a property in need of repairs is really seldom funded by banks; consequently the borrower will use a hard money lender settlement the hard money loan with conventional funding, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, temporary financing will be provided by a personal lender to the borrower to buy the property and rent it up. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with conventional financing. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers like doctors, lawyers, and attorneys who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional funding. Thus, there’s an enormous need for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We normally 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 looking at a mix of variables 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 with 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 a lawyer, appraisal fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward conditions without all of the concealed crap fees

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a huge 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 fee with hard money loans?

For 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 that the lender receives at least a modest yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment penalty 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 price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when employing?

Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

When completing flip or rehab project & a fix, what will 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 timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; so 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 listed repairs. The lender will also require a credit report and income statement from the borrower to show 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 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 information.

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