How to choose the best hard money lender in Lithia

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Hard Money Lender FL Lithia

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. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a temporary option (1–3 years commonly) 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 financing or a hard money loan over a cheaper conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance a single 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 Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, banks quite rarely finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and rehabilitate and to purchase the property payoff 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. Yet, a personal lender will give you short-term funding to the borrower to purchase the property and rent it up. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional funding consistently turn down quality borrowers including doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Consequently, there’s an enormous requirement for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we generally 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 on taking a look at a mix 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” (sum 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?

Most 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 a lawyer, appraisal fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without each of the concealed trash fees and costs an incredibly low origination fee of merely 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 of the fees (besides the application fee) are paid from your actual loan proceeds.

Will there be a prepayment penalty with hard money loans?

Typically hard money lenders in Lithia Florida implement a 3–6 month minimum interest condition. For instance, with a 6 prepayment 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 your lender receives at least a modest 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 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.

When applying is an assessment needed?

Yes, hard money loans generally demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.

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

Besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehab; therefore the lender will need to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will even require a credit report and income statement in the borrower to show that 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 in need of 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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