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 your borrower from a lender based mostly on the worth of the underlying asset that is collateralized. 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 collateral for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a temporary 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 financing or a hard money loan over a more economical traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan guaranteed by a property in need of repairs is really rarely funded by banks before it can be used; therefore the borrower uses a hard money lender then, and to purchase and rehabilitate the property payoff 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. Nevertheless, a private lender will provide temporary financing to the borrower to purchase the property and lease it up. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So even quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. So, there is a huge need for private lenders who look at the value of the underlying asset in comparison 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 typically 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 upon taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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 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 subsequently charge by a lawyer, appraisal fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all the rubbish fees that are concealed and costs a very low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a big 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 proceeds.

Can there be a prepayment fee with hard money loans?

Generally hard money lenders in Orlando Florida implement a 3–6 month minimum interest condition. By way of example, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so the lender receives a small yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no pre-payment penalty 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 appraisal, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an assessment required?

Yes, hard money loans usually demand broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, we are a Orlando hard money lender who orders an appraisal that is independent on the subject property.

When finishing a fix & flip or rehab job, what will 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 worksheet and timeline. The lender will use this as a guide in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehab; hence the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly 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 information.