How to choose the best hard money lender in Saint Cloud

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Hard Money Lender FL Saint Cloud

What is 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. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan. Where traditional loans are normally for 15–20 year periods, 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 conventional 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 affordable conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund one 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 generally funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, banks really rarely fund a loan secured by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a private lender provides short-term financing to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific period of time. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for normal lending consistently turn down quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there’s a huge requirement for private lenders who look 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 primarily on the LTV (loan to value). We usually 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 determined by looking at a combination of factors such as: (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 involved in asset based lending?

Most hard money lenders charge a loan 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 unaffiliated appraiser, and a loan processing fee. Capital Funding Financial costs a very low origination fee of only 2%* and offers straight forward conditions without each of the concealed junk fees

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan proceeds.

Is there a prepayment fee with hard money loans?

Typically hard money lenders in Saint Cloud Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so your lender receives at least a little 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 prepayment 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 appraisal, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When using is an appraisal needed,?

Yes, hard money loans generally demand broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.

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

Well besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will need to see the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender will also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly 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 info.