How to choose the best hard money lender in Immokalee

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Hard Money Lender FL Immokalee

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily 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 being used as security for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short-term option (1–3 years usually) 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund 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 generally financed 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. However, a personal lender will be pleased to give on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan secured by a property in need of repairs is quite rarely funded by banks; hence the borrower will use a hard money lender payoff the hard money loan with conventional funding, and then rehabilitate and to purchase the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary funding will be provided by a private lender to the borrower to buy the property and lease it up. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with traditional lending. (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. Thus traditional banks for normal lending consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Thus, there is a huge requirement for private lenders who look at the value of the underlying asset in comparison with 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?

Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of variables 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 involved in asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by a lawyer, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the crap fees that are concealed and charges an incredibly low origination fee of only 2%*

Can the loan fees be paid from the loan proceeds?

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

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

Normally hard money lenders in Immokalee Florida implement a 3–6 month minimum interest prerequisite. For 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 the lender receives at least a little return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently no prepayment fee will be issued.

How quickly 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 evaluation, title commitment). The typical bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When employing is an appraisal required?

Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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

Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers expertise in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus chiefly 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 information.