How to choose the best hard money lender in Naples

[dollars key=”0″]

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 mainly on the value of the underlying collateralized asset. 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 usually for 15–20 year durations, hard money loans are used as a short-term alternative (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 someone 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 financing or a hard money loan over a more economical traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. As an example, banks really infrequently fund a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender to buy and rehabilitate the property, and then 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. Nonetheless, short term lending will be provided by an exclusive lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with conventional funding. (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. So even quality borrowers such as doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Therefore, there’s an enormous requirement for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We typically 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 generally range from 10% all the way up to 15%. The rate by the lender is determined by looking at a mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 in 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 unbiased appraiser, and a loan processing fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward provisions without all the hidden crap fees

Can the loan fees be paid from the loan proceeds?

Yes, so long as there is a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid in the actual loan earnings.

Can there be a prepayment penalty with hard money loans?

Typically hard money lenders in Naples Florida implement a 3–6 month minimum interest condition. For example, 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 condition is put in place so your lender receives at least a small return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no pre-payment penalty 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 assessment, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When implementing is an assessment needed?

Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.

When completing a fix & flip or rehabilitation project, what will the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to find the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral 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 info.