How to choose the best hard money lender in Hollister

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Hard Money Lender FL Hollister

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan. Where conventional loans are generally for 15–20 year periods, 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 choose 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 conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance 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 financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be pleased to loan on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). For example, banks very rarely fund a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender will give you short-term financing to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. Therefore, there is certainly a huge importance of private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 upon looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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 a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by a lawyer, a loan processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the hidden trash fees and costs an extremely low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

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

Is there a pre-payment fee with hard money loans?

Generally hard money lenders in Hollister Florida implement a 3–6 month minimum interest condition. For example, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so that the lender receives at least a little yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, subsequently no pre-payment fee 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 appraisal, title commitment). The typical bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

When implementing is an evaluation required?

Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.

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

Well besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to see the borrowers expertise in managing or performing 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 will even require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the collateral rather than the credit score.

If you’re looking for 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 information.

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