How to choose the best hard money lender in Crystal River

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Hard Money Lender FL Crystal River

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the value of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short-term solution (1–3 years typically) 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 pick 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 funding or a hard money loan over a cheaper conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund an individual 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– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, banks quite rarely finance a loan guaranteed by a property in need of repairs; therefore the borrower uses a hard money lender settlement the hard money loan with traditional lending, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, temporary funding will be provided by a personal lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a period of time that is certain, the hard money loan will be refinanced by a commercial lender with conventional funding. (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. Consequently even quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Therefore, there is certainly an enormous importance of private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 determined by taking a look at a combination of factors such as: (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 associated with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by a lawyer, appraisal fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the concealed rubbish fees and costs an incredibly 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 (other than the application fee) are paid in the actual loan earnings.

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

For example, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so the lender receives a little return for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment fee will be issued.

How quickly can a hard money loan that is typical 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 assessment, 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 implementing is an assessment required,?

Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.

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

Well 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 uses this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; thus the lender will want to see the borrowers expertise in managing or performing real estate 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 to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily 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 information.

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