How to choose the best hard money lender in Naples

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Hard Money Lender FL Naples

What’s 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. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a short-term 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 dwelling.

Why exactly would a person 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 financing or a hard money loan over a more economical traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For example, banks really seldom fund a loan guaranteed by a property in need of repairs before it can be used; so the borrower uses a hard money lender settlement the hard money loan with traditional financing, and then to purchase 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 personal lender provides temporary financing to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a certain period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. So, there is a huge requirement for private lenders who look at the value of the underlying asset in comparison 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 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 upon looking at a combination 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” (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?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, financing processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without each of the hidden junk fees and costs an incredibly low origination fee of only 2%*

Can the loan fees be paid from the loan proceeds?

Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from your actual loan proceeds.

Will there be a pre-payment fee with hard money loans?

Ordinarily hard money lenders in Naples Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives a small yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently 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 assessment, 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.

When implementing is an assessment needed,?

Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.

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

Well besides the apparent 35–40% equity cushion, the lender will need to see the range 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; thus the lender will want to see the borrowers expertise in managing or performing property repairs. The lender will release funds in draws and require an inspection. The lender will also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the security and not the credit score.

If you’re 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 information.