How to choose the best hard money lender in Saint Marks

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Hard Money Lender FL Saint Marks

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the underlying collateralized asset. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a temporary alternative (1–3 years normally) 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 financing or a hard money loan over a cheaper traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to give on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). For example, a loan guaranteed by a property in need of repairs is very rarely funded by banks before it can be used; consequently the borrower will use a hard money lender settlement the hard money loan with conventional financing, and then to buy 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. Nonetheless, a personal lender will give you temporary financing to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a certain period of time. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for normal lending. Therefore, there’s a huge need for private lenders who look at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 dependent on 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 associated with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by an attorney, financing processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward terms without all of the hidden rubbish fees

Can the loan fees be paid from the loan proceeds?

Yes there is a huge enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan proceeds.

Is there a pre payment penalty with hard money loans?

For instance, with a 6 pre-payment 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 the lender receives a little return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently no prepayment penalty will be issued.

How fast 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 assessment, title commitment). The typical bargain 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 assessment required?

Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. We order an independent appraisal on the subject property.

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

Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the security and never 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 info.