How to choose the best hard money lender in Fort Pierce

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Hard Money Lender FL Fort Pierce

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a temporary 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 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 more economical conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund a single 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 typically financed within 7–14 days. (2) Property Needs 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 example, a loan guaranteed by a property in need of repairs is very seldom funded by banks; therefore the borrower will use a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will provide short term financing to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with conventional 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 traditional banks for normal lending consistently turn down even quality borrowers including doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Hence, there is certainly a huge importance of private lenders who look more at the value of the underlying asset in comparison to 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 normally 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 normally range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by a lawyer, an application fee, assessment fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial charges an incredibly low origination fee of merely 2%* and offers straight forward provisions without all the concealed trash fees

Can the loan fees be paid from your loan proceeds?

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

Can there be a pre payment fee with hard money loans?

By way of example, with a 6 pre payment 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 so the lender receives a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no prepayment fee will be issued.

How fast 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 evaluation, title commitment). The typical bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an appraisal required when applying?

Yes, hard money loans usually need an assessment, broker price opinion, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.

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

Well besides the obvious 35–40% equity cushion, the lender will need 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 rehab goals. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral and never 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 info.