How to choose the best hard money lender in Hosford

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Hard Money Lender FL Hosford

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying collateralized asset. Traditional banks and lenders focus chiefly 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 traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary option (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 provided 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 cheaper traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just one 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 typically financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. As an example, a loan guaranteed by a property in need of repairs is very seldom funded by banks before it can be used; so the borrower uses a hard money lender settlement the hard money loan with traditional financing, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender provides short term financing to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with normal funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional funding. Thus, there’s a huge need for private lenders who look 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 funding decision primarily on the LTV (loan to value). We typically 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?

Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is determined by looking at a combination 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 in asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, appraisal fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the junk fees that are hidden and costs an incredibly low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

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

Is there a prepayment fee with hard money loans?

For instance, with a 6 prepayment fee, if the borrower were 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 at least a little yield for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after six months, subsequently no prepayment penalty will be issued.

How quickly can a typical hard money loan 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 evaluation, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an evaluation needed,?

Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we are a Hosford hard money lender who orders an appraisal that is independent on the subject property.

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

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 uses this as helpful tips in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; thus the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the security rather than 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 information.

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