How to choose the best hard money lender in Pensacola

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Hard Money Lender FL Pensacola

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are generally 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 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 funding or a hard money loan over a cheaper traditional financing: (1) Quick Funding– traditional 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 financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be happy to lend on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, a loan guaranteed by a property in need of repairs is really infrequently funded by banks; hence the borrower uses a hard money lender payoff the hard money loan with traditional funding, and then to purchase and rehabilitate 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, an exclusive lender provides temporary financing to the borrower to purchase the property and rent it up. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for conventional funding consistently turn down even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Thus, there is a huge need for private lenders who look more at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We normally 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?

Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is determined by looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 then charge various fees for document preparation by a lawyer, evaluation fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the hidden rubbish fees and costs an extremely low origination fee of only 2%*

Can the loan fees be paid from the loan proceeds?

Yes there’s a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan earnings.

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

For 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 so the lender receives a small return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, then no pre payment fee will be issued.

How quickly can a hard money loan that is typical 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an assessment needed?

Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an independent appraisal at Capital Funding Financial.

When completing a repair & flip or rehabilitation job, what’ll the hard money lender require?

Besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender may also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly 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 information.

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