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 primarily on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short term option (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 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 economical conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, banks really infrequently finance a loan guaranteed by a property in need of repairs; hence the borrower will use a hard money lender then, and to buy 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 temporary funding to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a particular time period, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for normal lending consistently turn down even quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt. Therefore, there is certainly a huge need for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 looking at a mix 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 amount of the loan. Various fees for document preparation will then charge by a lawyer, assessment fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the rubbish fees that are concealed and charges a very low origination fee of only 2%*

Can the loan fees be paid from your 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 in the actual loan earnings.

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

By way of example, with a 6 pre payment penalty, 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 that the lender receives at least a modest 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, subsequently no prepayment penalty 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 assessment, title commitment). The typical deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an appraisal needed?

Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an appraisal. We are a Saint Petersburg hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; so the lender will need to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the collateral rather than the credit score.

If you are 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 information.