How to choose the best hard money lender in Fort Myers

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Hard Money Lender FL Fort Myers

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the underlying collateralized asset. 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 used as collateral for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term option (1–3 years typically) 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 traditional 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 one 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 typically financed within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, an exclusive lender will be pleased to lend on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan secured by a property in need of repairs is quite 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, short-term funding will be provided by an exclusive lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a period of time that is particular, the hard money loan will be refinanced by a commercial lender with normal 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 even quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. So, there is 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 typically look for a 50% – 65% LTV in our loans. What that means is we generally 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 upon looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 in asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, evaluation fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of only 2%* and offers straight forward terms without all of the hidden junk fees

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan earnings.

Can there be a pre-payment penalty with hard money loans?

For 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 so your lender receives a little return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after half a year, then 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 appraisal, 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 assessment required?

Yes, hard money loans usually require broker price opinion, an appraisal, or comparative sales analysis. We order an independent appraisal on the subject property.

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

Besides the obvious 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 information in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; so the lender will need to find 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 listed repairs. The lender may also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security and not the credit score.

If you are in need of 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.

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