How to choose the best hard money lender in Orange Park

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Hard Money Lender FL Orange Park

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily 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 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 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 funding or a hard money loan over a more affordable conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance a single 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 Needs Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be pleased to lend on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). As an example, a loan guaranteed by a property in need of repairs is really rarely funded by banks before it can be used; so the borrower will use a hard money lender settlement the hard money loan with traditional funding, and then rehabilitate and to purchase 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 funding will be provided by an exclusive lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional lending. So, there is certainly a huge requirement for private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we normally 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 determined by looking at a mix of factors such as: (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?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, an application fee, appraisal fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial charges a very low origination fee of only 2%* and offers straight forward terms without all of the trash fees that are concealed

Can the loan fees be paid from your 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 from your actual loan earnings.

Is there a prepayment penalty with hard money loans?

For instance, 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 your lender receives at least a little return for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment fee 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 appraisal, title commitment). The typical deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an evaluation required when applying?

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

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

Besides the obvious 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 capital for rehabilitation goals. Nothing ever goes as planned when performing a rehab; therefore the lender will need to see the borrowers experience in performing or managing property 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 even require a credit report and income statement in the borrower showing that 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’re 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.