How to choose the best hard money lender in Seminole

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Hard Money Lender FL Seminole

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 underlying collateralized asset. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a short-term alternative (1–3 years typically) 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 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 financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just one 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 generally funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a private lender will be happy to lend on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan guaranteed by a property in need of repairs is really infrequently funded by banks; hence the borrower will use a hard money lender payoff the hard money loan with traditional lending, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a personal lender will provide temporary lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan with normal 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. Thus quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional funding. Thus, there is certainly a huge requirement for private lenders who look more at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mainly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we usually lend out 65% 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 on 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 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 in asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, financing processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of merely 2%* and offers straight forward provisions without all of the rubbish fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a large enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from your actual loan earnings.

Can there be a prepayment penalty with hard money loans?

Generally hard money lenders in Seminole Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre-payment fee, if the borrower should happen 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 a borrower. If the borrower repays the loan after six months, then no pre-payment penalty will be issued.

How quickly 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 appraisal, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an evaluation needed,?

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

When finishing flip or rehabilitation job & a repair, what will 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 timeline and worksheet. The lender uses this as a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehab; thus the lender will need to see the borrowers expertise in performing or managing property repairs. The lender will release funds in draws and require an inspection. 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 chiefly on the asset value of the security and not the credit score.

If you’re looking for 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.