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 your borrower from a lender based mainly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a short-term option (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 pick 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 conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance just 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 commonly funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be pleased to loan on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). For example, banks quite seldom fund a loan secured by a property in need of repairs before it can be used; so the borrower will use a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with normal 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 private lender will give you short term financing to the borrower to buy the property and lease it up. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with normal funding. (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. So traditional banks for normal lending consistently turn down quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt. Hence, there’s a huge requirement for private lenders who look the value of the underlying asset compared 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 normally look for a 50% – 65% LTV in our loans. What that means is we generally lend out 65% 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 taking a look at a mix of variables 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 with 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 file preparation will subsequently charge by an attorney, an application fee, assessment fee from an independent appraiser, and financing processing fee. Capital Funding Financial charges an incredibly low origination fee of merely 2%* and offers straight forward terms without all of the concealed trash fees

Can the loan fees be paid from your loan proceeds?

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

Is there a pre-payment fee with hard money loans?

For 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 requirement is put in place so the lender receives a little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre payment 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 deal 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 evaluation required,?

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

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

Well 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 resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will need to find the borrowers experience in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender may also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the collateral 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 info.