How to choose the best hard money lender in Brandon

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Hard Money Lender FL Brandon

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying collateralized asset. 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 being 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 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 conventional 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 more affordable traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance a single 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 generally funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, a loan secured by a property in need of repairs is really seldom funded by banks; hence the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement 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, a private lender provides short term funding to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with conventional financing. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for conventional funding consistently turn down quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Consequently, there’s an enormous importance of private lenders who look more at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we normally 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 looking at a combination of variables 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 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 document preparation by a lawyer, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without all the concealed crap fees and charges an incredibly low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

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

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

For example, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives at least a modest return 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 prepayment fee will be issued.

How quickly 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 appraisal, title commitment). The typical bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an evaluation needed,?

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

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehab; consequently the lender will want to see the borrowers expertise in performing or managing property repairs. The lender will release funds in draws and require an inspection. The lender will even require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. However, 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 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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