How to choose the best hard money lender in Jacksonville

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Hard Money Lender FL Jacksonville

What’s 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 asset that is collateralized. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a temporary 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 home.

Why exactly would a person 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 more affordable traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund a single 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 generally financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be pleased to lend on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan secured by a property in need of repairs is really seldom funded by banks; hence the borrower will use a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short-term financing will be provided by an exclusive lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently even quality borrowers including doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. Thus, there is a huge requirement for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We generally 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 typically range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, appraisal fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial costs a very low origination fee of only 2%* and offers straight forward provisions without all of the concealed rubbish fees

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan earnings.

Can there be a pre payment fee with hard money loans?

By way of 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 condition is put in place in order for the lender receives a little return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no prepayment penalty will be issued.

How fast 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 evaluation, title commitment). The typical bargain takes about a couple of 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 usually require comparative sales analysis, broker price opinion, or an assessment. We are a Jacksonville hard money lender who orders an appraisal that is independent on the subject property.

When finishing flip or rehab job & a fix, what will the hard money lender require?

Besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security rather than 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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