How to choose the best hard money lender in Marco Island

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Hard Money Lender FL Marco Island

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a temporary solution (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 pick 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 conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund just one 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 financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Yet, an exclusive lender will be pleased to lend on a property that either lacks cash flow or needs physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks quite rarely fund a loan guaranteed by a property in need of repairs; so the borrower will use a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short term financing will be provided by a personal lender to the borrower to purchase the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a particular time frame. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers including physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for conventional lending. Therefore, there’s a huge importance of private lenders who look at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 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” (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 loan amount. Various fees for document preparation will subsequently charge by an attorney, a loan processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all of the crap fees that are hidden and charges an incredibly low origination fee of just 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 the fees (besides the application fee) are paid from the actual loan earnings.

Is there a pre payment penalty with hard money loans?

For instance, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives at least a small return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, subsequently no prepayment fee will be issued.

How fast can a typical hard money loan 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 deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an appraisal needed,?

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

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

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 capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the security and not 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.

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