How to choose the best hard money lender in Perry

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Hard Money Lender FL Perry

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. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security 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 conventional 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 more affordable 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 fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically financed 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. However, a personal lender will be happy to loan on a property that either lacks cash flow or needs physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, a loan secured by a property in need of repairs is very seldom funded by banks before it can be used; so the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will provide short term financing to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with conventional lending. (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 quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for normal lending. Therefore, there is an enormous need for private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we usually lend 65% out 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 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 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 in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by a lawyer, an application fee, evaluation fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all of the hidden trash fees and charges an extremely low origination fee of just 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 all of the fees (besides the application fee) are paid in the actual loan proceeds.

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

Ordinarily hard money lenders in Perry Florida implement a 3–6 month minimum interest prerequisite. For instance, with a 6 prepayment penalty, 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 at least a little yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, then no prepayment 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 evaluation, 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 needed when using?

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

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

Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing funds for rehabilitation 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 income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security rather than the credit score.

If you’re looking for 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 advice.

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