How to choose the best hard money lender in Baker

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Hard Money Lender FL Baker

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a temporary option (1–3 years usually) 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 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 financing: (1) Quick Funding– conventional banks take the absolute 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 finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, banks very rarely fund a loan secured by a property in need of repairs; so the borrower uses a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short term lending will be provided by an exclusive lender to the borrower to buy the property and lease it up. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with normal funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional funding consistently turn down quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there’s a huge need for private lenders who look more at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 dependent on taking a look at a mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 in asset based lending?

Most hard money lenders charge financing 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, an application fee, evaluation fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward conditions without all the hidden crap fees

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan earnings.

Is there a prepayment penalty with hard money loans?

Normally hard money lenders in Baker Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so the lender receives a modest yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee will be issued.

How quickly 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 assessment, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

When employing is an assessment required?

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

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

Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehab; consequently the lender will want to find the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. However, 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 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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