How to choose the best hard money lender in Newberry

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Hard Money Lender FL Newberry

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the asset that is collateralized that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year periods, 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 someone 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 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 finance 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 typically funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan guaranteed by a property in need of repairs is really rarely funded by banks before it can be used; hence the borrower uses a hard money lender payoff 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. However, short term financing will be provided by a private lender to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal financing once the property is stabilized for a specific period of time. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for normal lending. Consequently, there is certainly a huge importance of private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We usually 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 on taking a look at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 associated with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, a loan processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the crap fees that are hidden and costs an incredibly low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

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

Is there a pre payment fee with hard money loans?

Generally hard money lenders in Newberry Florida implement a 3–6 month minimum interest condition. By way of example, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so that the lender receives a small return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after half a year, then no pre payment fee will be issued.

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

When using is an evaluation required?

Yes, hard money loans generally demand broker price opinion, an assessment, or comparative sales analysis. We are a Newberry hard money lender who orders an appraisal that is independent on the subject property.

When finishing flip or rehabilitation project & a repair, 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 worksheet and timeline. The lender will use this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; hence the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. 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 mostly on the asset value of the collateral and not the credit score.

If you are 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.

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