How to choose the best hard money lender in Saint Petersburg

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Hard Money Lender FL Saint Petersburg

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly 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 generally for 15–20 year terms, hard money loans are used as a short term solution (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 someone choose 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 funding or a hard money loan over a more economical traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance a single 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 commonly financed within 7–14 days. (2) Property Demands 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 pleased to lend on a property that either lacks cash flow or demands 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 quite infrequently funded by banks before it can be used; so the borrower uses a hard money lender payoff the hard money loan with normal lending, 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. Nevertheless, a personal lender will provide short term funding to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently even quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional lending. So, there’s an enormous requirement for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We normally 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 dependent on taking a look at a mix of variables 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” (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?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by an attorney, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward terms without each of the hidden junk 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 (besides the application fee) are paid in the actual loan proceeds.

Is there a prepayment fee with hard money loans?

For example, with a 6 pre payment 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 a small yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment fee will be issued.

How quickly 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 assessment, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an evaluation needed,?

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

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

Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing capital for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to see the borrowers expertise in managing or performing property 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. Nonetheless, hard money lenders focus chiefly on the asset value of the security and never the credit score.

If you are 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.