How to choose the best hard money lender in Pinellas Park

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Hard Money Lender FL Pinellas Park

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the value of the asset that is collateralized 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 value of the asset used as security for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a temporary 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 dwelling.

Why exactly would someone choose 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 funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single 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 commonly financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a personal lender will be happy to give on a property that either lacks cash flow or needs physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan secured by a property in need of repairs is very seldom funded by banks; therefore the borrower will use a hard money lender rehabilitate and to purchase 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. However, a personal lender will give you short term lending to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a specific time frame. (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 traditional banks for normal funding consistently turn down quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. So, there’s a huge requirement for private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We generally 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?

Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is determined by 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 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 involved in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. 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 incredibly low origination fee of just 2%* and offers straight forward conditions without all of the junk fees that are concealed

Can the loan fees be paid from the loan proceeds?

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

Can there be a prepayment penalty with hard money loans?

Generally hard money lenders in Pinellas Park Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 prepayment fee, if the borrower should happen 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 at least a little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, subsequently no pre-payment penalty will be issued.

How fast can a typical hard money loan 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 deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an evaluation needed,?

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

When finishing a fix & 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 range of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehab; thus the lender will need to see the borrowers experience in performing or managing real estate 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 in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security and not 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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