How to choose the best hard money lender in Palm Harbor

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Hard Money Lender FL Palm Harbor

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly 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 primarily on the value of the asset used as security for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a temporary alternative (1–3 years usually) 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 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 more economical conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance 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 generally funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used by way of example, banks really infrequently finance a loan secured by a property in need of repairs; therefore the borrower will use a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender will give you short term funding to the borrower to buy the property and lease it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with conventional financing. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently even quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for normal funding. So, there is an enormous need for private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We usually 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?

The rate by the lender is dependent on looking 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” (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 involved with asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by an attorney, evaluation fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all of the junk fees that are hidden and costs an incredibly low origination fee of merely 2%*

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

Can there be a prepayment fee with hard money loans?

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 additional months of interest due. This requirement is put in place in order for the lender receives a small yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after half a year, then no pre payment fee will be issued.

How fast can a typical hard money loan 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 or two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an assessment required when implementing?

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

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to see the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the security and not the credit score.

If you’re looking for 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.

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