How to choose the best hard money lender in Lehigh Acres

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Hard Money Lender FL Lehigh Acres

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 asset that is collateralized that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term solution (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 someone choose a hard money loan (asset–based loan) over a traditional loan provided 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 more affordable traditional funding: (1) Quick Funding– conventional banks take a 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 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. Yet, a private lender will be happy 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 by way of example, banks really seldom fund a loan secured by a property in need of repairs; so the borrower will use a hard money lender settlement the hard money loan with conventional lending, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term financing will be provided by an exclusive lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional financing. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers like doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. So, there’s a huge importance of 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 generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 taking a look at a combination of factors 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 associated with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by an attorney, an application fee, evaluation fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without each of the junk fees that are hidden and charges a very low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a huge 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 fee with hard money loans?

Typically hard money lenders in Lehigh Acres Florida implement a 3–6 month minimum interest requirement. For instance, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently no pre-payment penalty 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 evaluation, title commitment). The typical deal takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an assessment required when implementing?

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

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

Well 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 will use this as a guide in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly 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 info.