How to choose the best hard money lender in Spring Hill

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Hard Money Lender FL Spring Hill

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a temporary 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 home.

Why exactly would someone 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 economical traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual 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 typically funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, an exclusive lender will be happy to lend on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). As an example, banks very infrequently fund a loan secured by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with normal lending. 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 will give you temporary lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with normal lending. (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. Consequently even quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for conventional lending. Consequently, there is certainly a huge requirement for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We usually 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 determined by taking a look at a mix 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” (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 in asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, assessment fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without each of the trash fees that are concealed and charges an incredibly low origination fee of just 2%*

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 all of the fees (apart from the application fee) are paid in the actual loan earnings.

Will there be a prepayment penalty 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 in order for the lender receives at least a little return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower 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 evaluation, title commitment). The typical bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an evaluation needed,?

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

When finishing flip or rehabilitation project & a fix, what’ll the hard money lender require?

Well besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws and require an inspection. The lender will even require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.

If you are 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 advice.