How to choose the best hard money lender in Freeport

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Hard Money Lender FL Freeport

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the value of the underlying collateralized asset. 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 used as collateral for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a short term option (1–3 years normally) 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 conventional 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 more economical conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance one 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 funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be pleased to loan on a property that either lacks cash flow or demands physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan secured by a property in need of repairs is quite seldom funded by banks; hence the borrower will use a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term financing will be provided by a private lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a period of time that is particular, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional funding consistently turn down quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Hence, there’s an enormous need for private lenders who look more at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a combination 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?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by an attorney, an application fee, appraisal fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial charges a very low origination fee of only 2%* and offers straight forward conditions without each of the trash fees that are hidden

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a huge 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.

Is there a pre-payment fee with hard money loans?

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 condition is put in place so the lender receives at least a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then no prepayment fee will be issued.

How fast 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 deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When implementing is an appraisal needed,?

Yes, hard money loans typically need broker price opinion, an assessment, or comparative sales analysis. We are a Freeport hard money lender who orders an appraisal that is independent on the subject property.

When finishing flip or rehab project & a repair, what’ll 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 funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; consequently the lender will want to see 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 listed repairs. The lender may also require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the collateral and never the credit score.

If you are 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 information.

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