How to choose the best hard money lender in Lake Worth

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Hard Money Lender FL Lake Worth

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a temporary 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 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 traditional funding: (1) Quick Funding– conventional 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 funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be pleased to give on a property that either lacks cash flow or necessitates 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 rarely funded by banks; hence the borrower uses a hard money lender payoff the hard money loan with conventional financing, 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. Nonetheless, a personal lender will provide short term funding to the borrower to purchase the property and rent it up. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for conventional funding consistently turn down even quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. Hence, there is certainly a huge importance of private lenders who look more at the value of the underlying asset in comparison 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?

The rate by the lender is determined by taking a look 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 with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, appraisal fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the crap fees that are hidden and costs a very 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 (other than the application fee) are paid from the actual loan earnings.

Is there a pre payment 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 at least a small return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, then no prepayment penalty 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an assessment required?

Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we are a Lake Worth hard money lender who orders an appraisal that is independent on the subject property.

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

Well besides the obvious 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 a guide in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; thus the lender will want to see the borrowers experience in performing or managing property repairs. The lender will release funds in draws and require an inspection. The lender may also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the security rather than 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 advice.