How to choose the best hard money lender in Lulu

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Hard Money Lender FL Lulu

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 collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years usually) 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 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 affordable traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund one 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– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, a loan guaranteed by a property in need of repairs is very seldom funded by banks before it can be used; hence the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff 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, an exclusive lender provides short term funding to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a certain time frame. (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. Thus traditional banks for normal funding consistently turn down quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt. Therefore, there’s a huge requirement for private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we usually lend out 65% 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 determined by 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 a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by a lawyer, an application fee, appraisal fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward terms without all the crap fees that are hidden

Can the loan fees be paid from the 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.

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

By way of 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 condition is put in place so that the lender receives a little return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment fee will be issued.

How fast can a typical hard money loan 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 appraisal, title commitment). The typical bargain takes about a couple of 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 usually need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an unaffiliated appraisal.

When finishing flip or rehabilitation project & a repair, what will 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 timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehab; hence the lender will want to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. 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. Nonetheless, hard money lenders focus mainly on the asset value of the security rather than 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.