How to choose the best hard money lender in Apopka

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Hard Money Lender FL Apopka

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, 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 dwelling.

Why exactly would a person choose a hard money loan (asset–based loan) over a traditional loan provided 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 traditional funding: (1) Quick Funding– traditional banks take a 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 fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks quite infrequently finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower uses a hard money lender rehabilitate and to buy the property, and then settlement 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. Nevertheless, an exclusive lender provides temporary financing to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain time period, 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 greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional financing. Consequently, there is an enormous requirement for private lenders who look the value of the underlying asset in comparison 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 on taking a look at a mix of factors 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?

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 document preparation by a lawyer, financing processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without each of the junk fees that are concealed and charges an incredibly low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a big 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 penalty with hard money loans?

For instance, 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 requirement is put in place in order for the lender receives a small return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no prepayment penalty will be issued.

How quickly 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an appraisal needed,?

Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to find the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the security and not the credit score.

If you are 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 advice.

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