How to choose the best hard money lender in Orlando

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Hard Money Lender FL Orlando

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 collateralized asset that is underlying. 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 worth of the asset used as security for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a temporary solution (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 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 fund just one 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 quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be happy to loan on a property that either lacks cash flow or needs 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; therefore the borrower will use a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short-term financing will be provided by an exclusive lender to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with normal funding once the property is stabilized for a specific period of time. (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. So even quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Thus, there is certainly an enormous importance of private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mainly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we generally 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 determined by looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and location, (4) borrower’s “skin in the game” (sum 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. Various fees for file preparation will subsequently charge by an attorney, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward provisions without all of the junk fees that are hidden

Can the loan fees be paid from the loan proceeds?

Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid in the actual loan earnings.

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

Generally hard money lenders in Orlando Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so your lender receives a modest yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment fee will be issued.

How fast 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 evaluation, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When using is an evaluation needed,?

Yes, hard money loans generally require broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws 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. Nonetheless, hard money lenders focus largely on the asset value of the security 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 info.

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