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 a borrower from a lender based mostly on the worth of the underlying asset that is collateralized. 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 used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short term option (1–3 years typically) 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 provided 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 finance an individual 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 generally funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, banks very seldom finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower will use a hard money lender settlement the hard money loan with traditional funding, 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. Yet, a personal lender provides short term funding to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with traditional 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 normal funding consistently turn down even quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Thus, there’s a huge requirement for private lenders who look more at the value of the underlying asset in comparison to 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 determined by taking a look at a combination of factors 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” (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. The lender will subsequently charge various fees for file preparation by a lawyer, financing processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of only 2%* and offers straight forward provisions without all of the trash fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes, so long as 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 in the actual loan earnings.

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

Ordinarily hard money lenders in Lehigh Acres Florida implement a 3–6 month minimum interest prerequisite. For example, 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 so the lender receives at least a small return for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no pre-payment fee will be issued.

How quickly can a hard money loan that is typical 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 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When using is an evaluation needed,?

Yes, hard money loans typically require an assessment, broker price opinion, or comparative sales analysis. We are a Lehigh Acres hard money lender who orders an appraisal that is independent on the subject property.

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to find the borrowers expertise in managing or performing 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 will also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the collateral and never 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 advice.