How to choose the best hard money lender in Sarasota

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Hard Money Lender FL Sarasota

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the value of the underlying asset that is collateralized. 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 value of the asset being used as security for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years usually) 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 traditional financing: (1) Quick Funding– conventional banks take the absolute 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 finance a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for instance, banks very seldom finance a loan secured by a property in need of repairs; therefore the borrower uses a hard money lender payoff the hard money loan with traditional financing, and then rehabilitate and to purchase the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender provides short term lending to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based entirely 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 for example physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Consequently, there is a huge need for private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of factors for example: (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 with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by a lawyer, evaluation fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward conditions without all of the crap fees that are concealed

Can the loan fees be paid from your loan proceeds?

Yes there’s a huge enough equity cushion in the real estate. Most of the time all 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 additional months of interest due. This condition is put in place so the lender receives at least a small yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, then no pre payment penalty will be issued.

How quickly 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 price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an assessment required?

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

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

Well besides the obvious 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 a guide in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; hence 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 listed repairs and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the security and never the credit score.

If you’re looking for 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.

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