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 your borrower from a lender based mainly 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 security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short term option (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 pick 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 more economical traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single family residential loan, any where between 60–90 days to finance 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 Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a personal lender will be pleased to loan on a property that either lacks cash flow or needs physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, a loan guaranteed by a property in need of repairs is quite seldom funded by banks before it can be used; consequently the borrower will use a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, an exclusive lender provides short-term funding 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 period. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence even quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal funding. Hence, there is certainly a huge requirement for 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 ordinarily lend 65% out 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 determined by taking a look at a mix 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” (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 a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by a lawyer, evaluation fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all the crap fees that are concealed and costs an incredibly low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a big enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from your actual loan proceeds.

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

For instance, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives a small return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, subsequently no pre-payment penalty will be issued.

How quickly can a typical hard money loan 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 appraisal, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an evaluation needed,?

Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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 scope of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will even require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the security and not the credit score.

If you’re looking for 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 information.

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