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 chiefly on the value 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 collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short term option (1–3 years commonly) 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance 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 typically funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, banks really 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 rehabilitate and to buy the property, and then payoff the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender will give you temporary 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 financing. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers such as for instance doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional lending. Consequently, there is an enormous importance of private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is determined by 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 location, (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 associated with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the junk fees that are hidden and charges an incredibly low origination fee of only 2%*

Can the loan fees be paid from the 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 in the actual loan earnings.

Is there a prepayment fee with hard money loans?

Normally hard money lenders in Tampa Florida implement a 3–6 month minimum interest condition. By way of 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 at least a little return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment fee 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 one or two 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 need an appraisal, broker price opinion, or comparative sales analysis. We order an independent appraisal.

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; thus the lender will want to see the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly 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 information.

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