How to choose the best hard money lender in Sebring

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Hard Money Lender FL Sebring

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short term solution (1–3 years typically) 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 traditional loan provided 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– traditional banks take a minimum of 45 days to fund just one 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 Needs Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, a loan secured by a property in need of repairs is very rarely funded by banks; consequently the borrower will use a hard money lender to purchase and rehabilitate the property, and then 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, an exclusive lender provides short-term lending to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional lending once the property is stabilized for a particular time frame. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. Thus, there’s a huge requirement for private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We typically 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?

The rate by the lender is dependent upon looking at a mix of variables 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?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, an application fee, appraisal fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without all the crap fees that are hidden and costs a very low origination fee of just 2%*

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 (other than the application fee) are paid from the actual loan earnings.

Will there be a prepayment fee with hard money loans?

For instance, with a 6 pre payment penalty, if the borrower should happen 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 allocation 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 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 a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When using is an evaluation required,?

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

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

Well 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 tips in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; thus the lender will need to see the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral and never the credit score.

If you are in need of 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.

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