How to choose the best hard money lender in Micanopy

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Hard Money Lender FL Micanopy

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the worth 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 terms, hard money loans are used as a temporary 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 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single 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– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. However, an exclusive lender will be pleased to give on a property that either lacks cash flow or needs 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 quite seldom funded by banks before it can be used; therefore the borrower uses a hard money lender payoff the hard money loan with normal funding, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a private lender will provide temporary funding to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a specific period of time. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So even quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for normal lending. So, there is certainly an enormous requirement for private lenders who look at the value of the underlying asset when compared 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 usually 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 dependent on looking 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?

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 an attorney, assessment fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the hidden crap fees and charges a very low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from your actual loan earnings.

Can there be a prepayment penalty with hard money loans?

For example, with a 6 pre-payment fee, 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 a little yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, then no prepayment penalty will be issued.

How fast 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 or two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when applying?

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

When completing a fix & flip or rehabilitation project, what will 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 worksheet and timeline. The lender uses this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; thus the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the collateral and not 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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