How to choose the best hard money lender in Tampa

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Hard Money Lender FL Tampa

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset 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 being used as collateral for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short term solution (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

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 conventional funding: (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 generally funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For instance, a loan secured by a property in need of repairs is really infrequently funded by banks before it can be used; consequently the borrower uses a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short term funding will be provided by a personal lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with traditional financing. (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. Thus traditional banks for conventional lending consistently turn down even quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Thus, there is a huge need for private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We generally 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?

Hard money loan rates usually range from 10% all the way up to 15%. 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 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 involved in 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 subsequently charge by a lawyer, financing processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of only 2%* and offers straight forward terms without all the junk fees that are concealed

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 the fees (apart from the application fee) are paid in the actual loan proceeds.

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

Usually hard money lenders in Tampa Florida implement a 3–6 month minimum interest requirement. For instance, with a 6 prepayment penalty, if the borrower were 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 return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after six months, 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 appraisal, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal required when implementing?

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

When completing a repair & flip or rehab project, what’ll the hard money lender require?

Besides the obvious 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 capital for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the security and never the credit score.

If you’re 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 information.