How to choose the best hard money lender in Oviedo

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Hard Money Lender FL Oviedo

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a short term option (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

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 cheaper traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual 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 Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan guaranteed by a property in need of repairs is quite infrequently funded by banks before it can be used; so the borrower uses a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender will give you short-term financing to the borrower to purchase the property and lease it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with traditional lending. (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. Consequently traditional banks for conventional financing consistently turn down even quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. Thus, there’s a huge importance of private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We typically 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?

Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a combination of variables 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?

Most hard money lenders charge a loan 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, an application fee, evaluation fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward conditions without each of the junk fees that are concealed

Can the loan fees be paid from the loan proceeds?

Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from the actual loan earnings.

Is there a pre-payment fee with hard money loans?

By way of example, with a 6 pre payment fee, if the borrower should happen 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 your borrower. If the loan is repaid by the borrower after six months, 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 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 appraisal required when applying?

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

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

Well besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehab; therefore the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender require an inspection and will release funds in draws. The lender may also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the collateral 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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