How to choose the best hard money lender in Pensacola

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Hard Money Lender FL Pensacola

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, 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 offered 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 more economical traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance one family residential loan, any where between 60–90 days to finance 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– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For example, banks quite rarely fund a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a private lender provides short term lending to the borrower to buy the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with normal funding once the property is stabilized for a certain time period. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers like doctors, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. Consequently, there’s a huge need for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 combination of variables 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” (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 loan amount. Various fees for document preparation will subsequently charge by an attorney, an application fee, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward provisions without all of the hidden junk fees

Can the loan fees be paid from your loan proceeds?

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

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

Normally hard money lenders in Pensacola 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 extra months of interest due. This condition is put in place so the lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no pre payment penalty will be issued.

How fast 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 price takes about a couple of 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 need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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

Besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report in the borrower showing 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 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 info.

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