How to choose the best hard money lender in Gainesville

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Hard Money Lender FL Gainesville

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the asset that is collateralized 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 primarily on the value of the asset being used as collateral for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short-term solution (1–3 years commonly) 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 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 traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just 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 commonly financed 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. For example, a loan guaranteed by a property in need of repairs is very seldom funded by banks before it can be used; so the borrower uses a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, 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 particular time period, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional lending consistently turn down quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Thus, there is certainly an enormous requirement for private lenders who look the value of the underlying asset in comparison with 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 typically 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a mix of factors 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” (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 involved in asset based lending?

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

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 of the fees (apart from the application fee) are paid from the actual loan earnings.

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

Usually hard money lenders in Gainesville Florida implement a 3–6 month minimum interest prerequisite. For instance, with a 6 pre-payment 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 your lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, then no pre payment penalty will be issued.

How quickly can a hard money loan that is typical 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 assessment, title commitment). The typical deal takes about one to two 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 usually need broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to see the borrowers expertise in performing or managing 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 to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.

If you’re 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.

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