How to choose the best hard money lender in Olustee

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Hard Money Lender FL Olustee

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a temporary alternative (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

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 funding or a hard money loan over a more affordable traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund just 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 generally financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. For example, banks very rarely fund a loan guaranteed by a property in need of repairs before it can be used; hence the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, temporary funding will be provided by a private lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a particular time frame, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal financing. Thus, there’s an enormous importance of private lenders who look the value of the underlying asset in comparison with 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 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 usually range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, an application fee, appraisal fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward terms without each of the concealed rubbish fees

Can the loan fees be paid from the loan proceeds?

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

Can there be a pre payment 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 additional 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 some borrower. If the loan is repaid by the borrower after half a year, then no pre-payment penalty will be issued.

How quickly 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 evaluation, title commitment). The typical bargain takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an appraisal needed,?

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

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

Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. 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. However, hard money lenders focus largely on the asset value of the security 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 information.

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