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 your borrower from a lender based primarily 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 used as security for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short-term solution (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 funding or a hard money loan over a cheaper traditional funding: (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 finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. As an example, banks really rarely finance a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short-term lending will be provided by a private lender to the borrower to buy the property and lease it up. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers including physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for conventional funding. Therefore, there’s a huge importance of private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We normally 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?

Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix 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” (amount 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?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, appraisal fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden crap fees and costs an incredibly low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from the actual loan earnings.

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

Usually hard money lenders in Crystal River Florida implement a 3–6 month minimum interest condition. For example, with a 6 prepayment penalty, 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 the lender receives a modest yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, subsequently no pre payment penalty 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an appraisal required?

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

When finishing a fix & flip or rehabilitation job, what’ll the hard money lender require?

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 uses this as a guide in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will need to find the borrowers expertise in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will 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 mostly on the asset value of the security and never the credit score.

If you are 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.