How to choose the best hard money lender in Gainesville

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Hard Money Lender FL Gainesville

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, 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 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 more affordable traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance just 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 generally 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 in need of repair. Yet, an exclusive lender will be pleased to lend on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). By way of example, banks really rarely finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and to buy and rehabilitate the property settlement 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. Nonetheless, short-term funding will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional financing once the property is stabilized for a particular time frame. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for conventional funding consistently turn down quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Hence, there is certainly an enormous importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). 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?

The rate by the lender is dependent upon taking a look at a mix of factors such as: (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 involved with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, an application fee, evaluation fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward conditions without each of the trash fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.

Can there be a prepayment fee with hard money loans?

By way of example, with a 6 pre payment penalty, 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 your lender receives a little return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after half a year, then no prepayment 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 price takes about one or two weeks to finance 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 require an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to see the borrowers expertise in performing or managing property 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 in the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the collateral and not the credit score.

If you’re 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 advice.