How to choose the best hard money lender in Boca Raton

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Hard Money Lender FL Boca Raton

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying asset that is collateralized. 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 security for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a short-term solution (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 pick 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 funding or a hard money loan over a cheaper conventional 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 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 Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, banks really rarely fund a loan guaranteed by a property in need of repairs; therefore the borrower uses a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender will provide short-term funding to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific period of time. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are turned down by traditional banks for conventional financing. Consequently, there’s an enormous need for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly 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?

Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 in asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, financing processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the concealed rubbish fees and costs an extremely low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

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

Is there a pre payment fee with hard money loans?

For instance, with a 6 pre payment fee, 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 so your lender receives at least a modest return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, then no prepayment fee 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 evaluation, title commitment). The typical bargain takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an assessment needed?

Yes, hard money loans usually require an assessment, broker price opinion, or comparative sales analysis. We are a Boca Raton hard money lender who orders an appraisal that is independent on the subject property.

When finishing a repair & flip or rehab 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 tips in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehab; hence the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.

If you’re in need of 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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