How to choose the best hard money lender in Ocala

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Hard Money Lender FL Ocala

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the underlying asset that is collateralized. 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 value of the asset used as collateral for the loan. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a short term option (1–3 years normally) 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 conventional 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 a minimum of 45 days to fund an individual 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 financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a private lender will be happy to lend on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks very seldom finance a loan guaranteed by a property in need of repairs; therefore the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender provides short term lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a period of time that is particular, 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, previous income, and ability to repay the debt. So quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Hence, there is an enormous requirement for private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We normally 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 dependent on looking 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” (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 amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, appraisal fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward provisions without each of the hidden crap fees

Can the loan fees be paid from your loan proceeds?

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

Will there be a pre payment penalty with hard money loans?

For example, with a 6 prepayment 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 that the lender receives a small return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre payment penalty will be issued.

How quickly can a hard money loan that is typical 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 appraisal, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When employing is an appraisal required,?

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

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws. The lender will even require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly on the asset value of the collateral and never the credit score.

If you are looking for 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.