How to choose the best hard money lender in Land O Lakes

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Hard Money Lender FL Land O Lakes

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 asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value 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 short-term solution (1–3 years typically) 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 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 economical traditional financing: (1) Quick Funding– traditional banks take the absolute 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 quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be pleased to give on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). For example, banks really seldom fund a loan guaranteed by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with normal financing. 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 private lender to the borrower to buy the property and lease 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 lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence even quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Thus, there is certainly a huge requirement for private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 dependent upon looking at a mix of factors 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” (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?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by an attorney, assessment fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the junk fees that are hidden and charges an extremely low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes there’s a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from the actual loan proceeds.

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

For instance, with a 6 prepayment penalty, if the borrower should happen 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 modest return for the time, hassle and allocation 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 typical hard money loan 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 assessment, 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 applying is an evaluation needed?

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

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

Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to find the borrowers expertise in managing or performing real estate 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 exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral and not 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.

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