How to choose the best hard money lender in Lake Wales

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Hard Money Lender FL Lake Wales

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are generally for 15–20 year periods, 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 home.

Why exactly would someone pick a hard money loan (asset–based loan) over a conventional 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 affordable conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance 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 commonly financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, banks really rarely finance a loan secured by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender settlement the hard money loan with normal 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. Yet, temporary lending will be provided by a personal lender to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a certain time frame. (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. Thus traditional banks for conventional lending consistently turn down quality borrowers for example doctors, lawyers, and attorneys who have high incomes but also have lots of debt. Consequently, there is a huge requirement for private lenders who look more at the value of the underlying asset compared to 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 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?

The rate by the lender is dependent upon looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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 with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by an attorney, assessment fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all the trash fees that are hidden and charges an incredibly low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from your actual loan earnings.

Is there a prepayment fee with hard money loans?

Typically hard money lenders in Lake Wales Florida implement a 3–6 month minimum interest requirement. By way of example, with a 6 prepayment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives a small yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, then no pre-payment fee 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 appraisal, title commitment). The typical bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an evaluation required?

Yes, hard money loans generally need an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; so the lender will want to find the borrowers experience 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 for such repairs that are listed. 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. However, hard money lenders focus largely on the asset value of the collateral rather than 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 advice.