How to choose the best hard money lender in Jacksonville

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Hard Money Lender FL Jacksonville

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus mainly on the credit and income 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 traditional loans are normally for 15–20 year periods, hard money loans are used as a short-term option (1–3 years normally) 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 choose 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 more economical traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. For instance, a loan secured by a property in need of repairs is really rarely funded by banks before it can be used; hence the borrower will use a hard money lender to purchase and rehabilitate 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. However, a private lender will provide short term lending to the borrower to buy the property and lease it up. Once the property is stabilized for a particular period of time, a commercial lender will refinance the hard money loan with traditional lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional financing consistently turn down even quality borrowers including doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Consequently, there is an enormous importance of private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We generally 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?

Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a combination of variables such as: (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 involved in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, financing processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward conditions without all the concealed trash fees

Can the loan fees be paid from the loan proceeds?

Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid in the actual loan proceeds.

Will there be a prepayment fee with hard money loans?

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

How quickly can a hard money loan that is typical 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 appraisal, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when implementing?

Yes, hard money loans typically require broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an independent appraisal on the subject property.

When completing a repair & flip or rehabilitation project, what will the hard money lender require?

Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will need to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement from the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the collateral and not the credit score.

If you are looking for 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 info.