How to choose the best hard money lender in Palmetto

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Hard Money Lender FL Palmetto

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value of the asset that is collateralized that is underlying. 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 worth of the asset used as collateral for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short term solution (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 a person choose 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 more economical traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund just 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 Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, banks really rarely fund a loan guaranteed by a property in need of repairs; therefore the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, an exclusive lender provides short-term financing to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a period of time that is particular, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for conventional financing consistently turn down even quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Consequently, there is certainly a huge importance of private lenders who look more at the value of the underlying asset in comparison with 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 usually 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 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” (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?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by a lawyer, an application fee, appraisal fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without each of the trash fees that are concealed and costs an extremely low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan proceeds.

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

Ordinarily hard money lenders in Palmetto Florida implement a 3–6 month minimum interest requirement. 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 modest return 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 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 evaluation, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an evaluation required,?

Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an assessment. We order an unaffiliated appraisal.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; thus the lender will need to find the borrowers expertise in performing or managing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the collateral rather than the credit score.

If you’re 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.

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