How to choose the best hard money lender in Pahokee

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Hard Money Lender FL Pahokee

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly on income and the credit 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 usually for 15–20 year periods, hard money loans are used as a short-term 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 a person pick a hard money loan (asset–based loan) over a traditional loan provided 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 cheaper traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund just one 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 financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, a loan guaranteed by a property in need of repairs is quite seldom funded by banks before it can be used; hence the borrower uses a hard money lender settlement the hard money loan with traditional funding, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a personal lender will provide short-term funding to the borrower to purchase 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 specific time period. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for normal financing consistently turn down quality borrowers for example physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Hence, there is an enormous importance of private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. 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 upon taking a look at a mix of factors for example: (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 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 document preparation will subsequently charge by an attorney, evaluation fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward provisions without all the concealed crap fees

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 each of the fees (besides the application fee) are paid in the actual loan earnings.

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

Ordinarily hard money lenders in Pahokee Florida implement a 3–6 month minimum interest prerequisite. 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 your lender receives at least a small return 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 prepayment 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 appraisal, title commitment). The typical deal takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an assessment needed when implementing?

Yes, hard money loans typically demand an assessment, broker price opinion, or comparative sales analysis. We are a Pahokee 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?

Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will also require income statement and a credit report from the borrower to exhibit 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’re 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 information.

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