How to choose the best hard money lender in Orlando

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Hard Money Lender FL Orlando

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short term solution (1–3 years normally) 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 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 cheaper conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a personal 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). For instance, a loan secured by a property in need of repairs is quite seldom funded by banks before it can be used; consequently the borrower will use a hard money lender to purchase and rehabilitate the property, and then payoff 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. Nevertheless, an exclusive lender will give you 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 normal lending. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers for example physicians, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for conventional financing. Consequently, there’s an enormous need for private lenders who look at the value of the underlying asset when compared with the loan amount 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?

The rate by the lender is dependent on taking a look at a combination 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 with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by an attorney, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without each of the concealed trash fees and costs an extremely low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

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

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

Generally hard money lenders in Orlando Florida implement a 3–6 month minimum interest condition. For example, with a 6 pre payment fee, if the borrower were 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 at least a little yield for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after six months, subsequently no pre payment 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 assessment, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when implementing?

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

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehab; so the lender will need 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 also require a credit report and income statement from the borrower showing 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 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.