How to choose the best hard money lender in Englewood

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Hard Money Lender FL Englewood

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a temporary 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 choose 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 financing or a hard money loan over a cheaper conventional funding: (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 fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks before it can be used; hence the borrower will use a hard money lender rehabilitate and to buy 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. Yet, short term lending will be provided by an exclusive lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a particular period of time, a commercial lender will refinance the hard money loan with traditional funding. (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. Thus even quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Therefore, there is a huge requirement for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We typically 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 mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial offers straight forward conditions without each of the concealed trash fees and costs a very low origination fee of just 2%*

Can the loan fees be paid from the 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 your actual loan earnings.

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

For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place in order for the lender receives a modest return for the time, hassle and allocation of its funds to your 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 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 deal takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an appraisal required?

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

When completing flip or rehabilitation project & a fix, 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 a guide in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; consequently 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 listed repairs and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the security rather than the credit score.

If you’re 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 info.

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