How to choose the best hard money lender in Hollywood

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Hard Money Lender FL Hollywood

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the collateralized asset 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 primarily on the credit and income of the borrower. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term alternative (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 someone pick 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 financing or a hard money loan over a cheaper traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance a single 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 funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. For example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks before it can be used; therefore the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will provide short term funding to the borrower to buy the property and lease it up. Once the property is stabilized for a time frame that is particular, the hard money loan will be refinanced by a commercial lender with conventional financing. (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 traditional banks for normal lending consistently turn down even quality borrowers like doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Thus, there’s a huge importance of private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We usually 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 on looking at a mix of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 in asset based lending?

Most 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 a lawyer, assessment fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the trash fees that are hidden and charges an extremely low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

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

Can there be a pre payment penalty with hard money loans?

By way of example, with a 6 pre-payment penalty, 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 your lender receives a modest 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 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 evaluation, 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.

Is an evaluation needed when employing?

Yes, hard money loans generally require an assessment, broker price opinion, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us 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 extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; thus the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and never the credit score.

If you’re 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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