How to choose the best hard money lender in Gibsonton

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Hard Money Lender FL Gibsonton

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the value 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 worth 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 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– traditional banks take a minimum of 45 days to finance an individual 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 generally funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used by way of example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks; so the borrower will use a hard money lender then, and rehabilitate and to purchase the property settlement 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. Nevertheless, a personal lender will give you short term financing to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So even quality borrowers including physicians, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for normal financing. Hence, there is a huge importance of private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we usually lend 65% out 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 on looking 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 with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, assessment fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the concealed junk fees and charges an incredibly low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan earnings.

Can there be a prepayment penalty 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 additional months of interest due. This requirement is put in place so that 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 six months, subsequently no pre payment penalty 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 assessment, title commitment). The typical price takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an assessment required?

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

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehab; therefore the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the collateral and never the credit score.

If you are 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 info.

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