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 a borrower from a lender based primarily on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where conventional loans are normally 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 pick a hard money loan (asset–based loan) over a conventional 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 traditional funding: (1) Quick Funding– traditional banks take the absolute 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 fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. As an example, banks quite rarely finance a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender rehabilitate and to purchase 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 lending 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 financing once the property is stabilized for a particular time period. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional funding consistently turn down even quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Therefore, there’s a huge importance of private lenders who look 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 funding decision mostly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we typically lend 65% out of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 involved in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, assessment fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all the crap fees that are concealed and costs a very low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

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

Will there be a prepayment penalty with hard money loans?

For 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 in order for the 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 pre-payment fee 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 evaluation, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When implementing is an appraisal needed,?

Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an independent appraisal at Capital Funding Financial.

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

Besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection. The lender may also require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security rather than 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.

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