How to choose the best hard money lender in Dunnellon

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Hard Money Lender FL Dunnellon

What is hard money loan?

A hard money loan is a loan given to your 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 mainly on the value of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short-term option (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 someone pick 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 financing or a hard money loan over a cheaper conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance 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 typically financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be pleased to give on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, a loan secured by a property in need of repairs is quite seldom funded by banks before it can be used; therefore the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short term funding will be provided by a private lender to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a particular time frame. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional financing consistently turn down quality borrowers for example physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Hence, there’s an enormous requirement for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). 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?

Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is dependent upon 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 involved with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, an application fee, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without each of 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 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 from the actual loan earnings.

Can there be a prepayment penalty with hard money loans?

Typically hard money lenders in Dunnellon Florida implement a 3–6 month minimum interest prerequisite. By way of example, 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 the lender receives a small yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after half a year, then no pre-payment penalty 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 evaluation, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when applying?

Yes, hard money loans typically need broker price opinion, an assessment, or comparative sales analysis. We order an unaffiliated appraisal.

When finishing a repair & flip or rehab project, what’ll the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will need to find 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 will even 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 largely on the asset value of the collateral and not the credit score.

If you’re looking for 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 info.