How to choose the best hard money lender in Tampa

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Hard Money Lender FL Tampa

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short-term alternative (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 economical traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance 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 commonly financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a personal lender will be happy to loan on a property that either lacks cash flow or requires physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks quite rarely finance a loan guaranteed by a property in need of repairs; hence the borrower will use a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a private lender will give you short term lending to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for normal financing consistently turn down even quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there is certainly a huge importance of private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we typically 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 looking at a combination 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” (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 amount of the loan. The lender will then charge various fees for file preparation by a lawyer, an application fee, assessment fee from an independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without all the crap fees that are hidden and charges an incredibly low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes there is a large 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.

Can there be a pre payment fee with hard money loans?

Typically hard money lenders in Tampa Florida implement a 3–6 month minimum interest condition. 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 additional months of interest due. This condition is put in place so your lender receives at least a small yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, subsequently no prepayment 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 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an assessment needed,?

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

When completing a repair & flip or rehabilitation project, what’ll 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 worksheet and timeline. The lender will use this as a guide in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will need to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security rather than the credit score.

If you are 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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