How to choose the best hard money lender in Altamonte Springs

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Hard Money Lender FL Altamonte Springs

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the underlying collateralized asset. 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 usually for 15–20 year durations, hard money loans are used as a short term solution (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would a person pick a hard money loan (asset–based loan) over a conventional loan provided 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 economical traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance 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 financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks very rarely finance a loan secured by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary lending will be provided by a personal lender 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 normal funding once the property is stabilized for a certain time period. (3) Not based exclusively on credit or income– Traditional banks rely heavily 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 a lot of debt are consistently turned down by traditional banks for normal lending. So, there’s a huge importance of private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We typically 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?

The rate by the lender is determined by looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by an attorney, an application fee, appraisal fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward conditions without each of the trash fees that are hidden

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.

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

By way of 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 requirement is put in place so that the lender receives at least a small return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre payment penalty 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 assessment, title commitment). The typical deal takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an appraisal required?

Yes, hard money loans typically demand broker price opinion, an assessment, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.

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

Besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender may also require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the security and not the credit score.

If you’re looking for 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 info.