How to choose the best hard money lender in Longwood

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Hard Money Lender FL Longwood

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the underlying asset that is collateralized. 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 mainly 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 solution (1–3 years typically) 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 pick a hard money loan (asset–based loan) over a conventional 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 economical conventional funding: (1) Quick Funding– conventional banks take a 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 Requires Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, a loan guaranteed by a property in need of repairs is really infrequently funded by banks; consequently the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender will give you short-term lending to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a time frame that is particular, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for normal lending. Thus, there’s a huge need for private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mainly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 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 financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, assessment fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the crap fees that are hidden and charges an incredibly low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from your actual loan earnings.

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

Normally hard money lenders in Longwood Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so your lender receives a small yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, subsequently 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 evaluation, title commitment). The typical bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When employing is an assessment needed,?

Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an assessment. We order an unaffiliated appraisal.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will need to find the borrowers experience in managing or performing real estate 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 even 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 chiefly on the asset value of the security rather than the credit score.

If you are 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.