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 your borrower from a lender based mainly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a short-term solution (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would someone 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 conventional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a private lender will be pleased to give on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, a loan secured by a property in need of repairs is quite rarely funded by banks before it can be used; therefore the borrower will use a hard money lender payoff the hard money loan with conventional lending, and then to buy and rehabilitate 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, an exclusive lender will give you temporary financing to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a particular time period. (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. Thus quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. So, there’s a huge need for 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 typically 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 dependent upon looking at a mix of variables such as: (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 in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward conditions without all the concealed rubbish fees

Can the loan fees be paid from the loan proceeds?

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

Will there be a pre-payment penalty with hard money loans?

Normally hard money lenders in Leesburg Florida implement a 3–6 month minimum interest requirement. For instance, with a 6 pre-payment penalty, 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 at least a modest return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then no pre-payment 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 appraisal, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when employing?

Yes, hard money loans usually demand comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.

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

Well 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 uses this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will need to find the borrowers expertise in managing or performing 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 income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security and not 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 info.

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