How to choose the best hard money lender in Leesburg

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Hard Money Lender FL Leesburg

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the collateralized asset 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 worth of the asset being used as security for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a temporary alternative (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 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 funding or a hard money loan over a cheaper traditional funding: (1) Quick Funding– conventional 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 fund a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, a loan secured by a property in need of repairs is really infrequently funded by banks before it can be used; so the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender provides short term financing to the borrower to purchase the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional lending once the property is stabilized for a certain period of time. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So traditional banks for conventional funding consistently turn down even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Hence, there is an enormous importance of private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we typically 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 normally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix of variables such as: (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 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, a loan processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the rubbish fees that are concealed and charges an extremely low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid in the actual loan proceeds.

Is there a pre payment penalty with hard money loans?

For example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra 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 your borrower. If the borrower repays the loan after six months, then no pre payment penalty will be issued.

How fast can a typical hard money loan close?

At Capital Funding Financial, we’re 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.

When using is an assessment required?

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

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

Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to find the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the collateral and not the credit score.

If you’re looking for 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 info.

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