How to choose the best hard money lender in Lutz

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Hard Money Lender FL Lutz

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily 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 terms, hard money loans are used as a short term option (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

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 funding or a hard money loan over a cheaper traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund 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 needing repair. Nonetheless, a private lender will be pleased to give on a property that either lacks cash flow or requires physical progress so long as the borrower has enough “skin in the game” (equity). As an example, a loan secured by a property in need of repairs is really rarely funded by banks before it can be used; consequently the borrower will use a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a private lender will provide short term lending to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with conventional financing once the property is stabilized for a certain time period. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for normal financing consistently turn down even quality borrowers like doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Consequently, there’s a huge need for private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily lend out 65% of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

Hard money loan rates normally range from 10% all the way up to 15%. 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 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?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, an application fee, evaluation fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without all of the trash fees that are concealed and costs a very low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

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

Is there a pre-payment fee with hard money loans?

For instance, with a 6 prepayment fee, if the borrower were 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 modest yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no pre payment fee 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 price takes about 1 to 2 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 usually require an assessment, broker price opinion, or comparative sales analysis. We order an unaffiliated appraisal.

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

Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. However, 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 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.