How to choose the best hard money lender in Hudson

[dollars key=”0″]

Hard Money Lender FL Hudson

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. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a short term solution (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 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 cheaper traditional funding: (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 finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a private lender will be pleased to give on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, a loan secured by a property in need of repairs is very rarely funded by banks; hence the borrower uses a hard money lender settlement the hard money loan with conventional lending, and then to buy 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. Yet, short term financing will be provided by a personal lender to the borrower to buy the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a particular time period. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are 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 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 out 65% 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 taking a look 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” (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?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by a lawyer, financing processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the concealed trash fees and charges an incredibly low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

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

Is there a prepayment fee with hard money loans?

For example, with a 6 pre payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives a small return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, then no pre-payment fee will be issued.

How fast 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 price 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 generally demand broker price opinion, an appraisal, or comparative sales analysis. We order an independent appraisal 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 need to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to see the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection. The lender will also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security and never 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 advice.