How to choose the best hard money lender in Tallahassee

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Hard Money Lender FL Tallahassee

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short term alternative (1–3 years normally) 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 funding or a hard money loan over a cheaper conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single family residential loan, any where between 60–90 days to finance 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 conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a private lender will be pleased to lend on a property that either lacks cash flow or demands physical progress so long as the borrower has enough “skin in the game” (equity). As an example, banks really rarely finance a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff 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. Nonetheless, short term financing will be provided by a private lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. So even quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. Therefore, there is certainly an enormous need for private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We normally 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 on taking a look at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and location, (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 associated with asset based lending?

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

Can the loan fees be paid from the loan proceeds?

Yes there is a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from your actual loan proceeds.

Is there a pre payment fee with hard money loans?

For example, 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 that the lender receives a little yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, then no prepayment penalty will be issued.

How quickly can a hard money loan that is typical 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 bargain 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 appraisal needed,?

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

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

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 a guide in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to find the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security and not the credit score.

If you are 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 information.

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