How to choose the best hard money lender in Clearwater

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Hard Money Lender FL Clearwater

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 underlying asset that is collateralized. Traditional banks and lenders focus mostly on income and the credit 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 periods, hard money loans are used as a short term alternative (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would someone 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 affordable traditional financing: (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 financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. For example, banks quite infrequently finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower will use a hard money lender payoff the hard money loan with traditional funding, and then rehabilitate and to purchase the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short-term lending will be provided by an exclusive lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for normal lending consistently turn down even quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt. Thus, there is a huge importance of private lenders who look at the value of the underlying asset when compared 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 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 factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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?

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 document preparation by a lawyer, assessment fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of merely 2%* and offers straight forward provisions without all of the hidden crap fees

Can the loan fees be paid from the loan proceeds?

Yes there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from the actual loan earnings.

Is there a prepayment fee with hard money loans?

By way of example, with a 6 prepayment 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 your lender receives a small yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, 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 appraisal, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when employing?

Yes, hard money loans usually demand an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we are a Clearwater hard money lender who orders an appraisal that is independent on the subject property.

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

Well besides the obvious 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 tips in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to find the borrowers expertise in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender may also require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral and not the credit score.

If you’re 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 info.