How to choose the best hard money lender in Homestead

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Hard Money Lender FL Homestead

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the underlying collateralized asset. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years commonly) 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 economical traditional funding: (1) Quick Funding– conventional banks take the absolute 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 typically funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks; hence the borrower will use a hard money lender then, and rehabilitate and to purchase the property payoff 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 private lender provides short term funding to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a certain time frame. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for conventional financing consistently turn down quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Thus, there is an enormous need for private lenders who look more at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we typically 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 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” (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 associated with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by a lawyer, evaluation fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial costs a very low origination fee of merely 2%* and offers straight forward conditions without each of the trash fees that are concealed

Can the loan fees be paid from the loan proceeds?

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

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

Generally hard money lenders in Homestead Florida implement a 3–6 month minimum interest prerequisite. For instance, with a 6 pre-payment 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 so your lender receives a little return for the time, hassle and allocation 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 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 deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an assessment required?

Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. We order an independent appraisal on the subject property.

When finishing a repair & 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 worksheet and timeline. The lender will use this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; so the lender will need to find the borrowers expertise in managing or performing real estate 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 income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the security and never the credit score.

If you’re in need of 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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