How to choose the best hard money lender in Tampa

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Hard Money Lender FL Tampa

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the asset that is collateralized that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short term 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 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 cheaper traditional financing: (1) Quick Funding– conventional 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 generally financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be pleased to loan on a property that either lacks cash flow or needs physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks; so the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with conventional 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 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 certain period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently quality borrowers including physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. So, there is an enormous requirement for private lenders who look at 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 usually 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 normally range from 10% all the way up to 15%. 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 condition and place, (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 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 then charge various fees for file preparation by an attorney, financing processing fee, evaluation fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the concealed trash fees and costs an incredibly low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

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

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

For instance, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for the lender receives a little 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 penalty will be issued.

How fast 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 price takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

When implementing is an appraisal required?

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

When completing flip or rehab job & a repair, what will the hard money lender require?

Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to see the borrowers experience in managing or performing real estate repairs. The lender require an inspection 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 exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security and never 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 advice.

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