How to choose the best hard money lender in Glen Saint Mary

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Hard Money Lender FL Glen Saint Mary

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly 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 primarily on the value of the asset used as collateral for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term option (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 someone choose a hard money loan (asset–based loan) over a traditional loan offered by a bank with lower rates?

There are many reasons why a borrower would choose to use private funding or a hard money loan over a more economical conventional 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 finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan secured by a property in need of repairs is really rarely funded by banks before it can be used; hence the borrower uses a hard money lender settlement the hard money loan with traditional lending, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, temporary financing will be provided by a personal lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific time frame. (3) Not based exclusively 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 lending consistently turn down even quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Therefore, there is an enormous need for private lenders who look more at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we generally 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 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?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, evaluation fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of just 2%* and offers straight forward provisions without all of the rubbish fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a large 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.

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

For example, with a 6 prepayment 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 in order for the lender receives at least a modest 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 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 appraisal, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

Is an assessment needed when applying?

Yes, hard money loans usually need an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.

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

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 helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehab; thus the lender will want 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 exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and not the credit score.

If you are 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 advice.

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