How to choose the best hard money lender in Sebring

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Hard Money Lender FL Sebring

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years usually) 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 pick a hard money loan (asset–based loan) over a conventional loan provided 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 more affordable conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund 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 generally funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, 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). Before it can be used by way of example, banks really seldom finance a loan guaranteed by a property in need of repairs; hence the borrower uses a hard money lender settlement the hard money loan with normal lending, 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. Nonetheless, a private lender provides 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 funding. (3) Not based exclusively 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 conventional financing consistently turn down quality borrowers such as doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Consequently, there’s a huge need for private lenders who look more at the value of the underlying asset compared to 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 generally lend 65% out 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 upon taking a look at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the concealed trash fees and charges an incredibly low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan earnings.

Is there a prepayment 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 in order for 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, then 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 evaluation, title commitment). The typical bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal required when applying?

Yes, hard money loans typically demand an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we are a Sebring hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; hence the lender will need to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the collateral and never the credit score.

If you’re 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 advice.

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