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 a borrower from a lender based chiefly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a temporary solution (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would someone choose 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 financing or a hard money loan over a cheaper traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund a single family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be pleased to give on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan secured by a property in need of repairs is very infrequently funded by banks; so the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will give you temporary financing to the borrower to buy the property and rent it up. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with conventional 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. Hence traditional banks for normal financing consistently turn down quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Thus, there’s an enormous need for private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We normally 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 normally range from 10% all the way up to 15%. The rate by the lender is determined by looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?

Most 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, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward conditions without each of the rubbish fees that are hidden

Can the loan fees be paid from your loan proceeds?

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

Will 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. For example, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so 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 fee will be issued.

How quickly can a typical hard money loan close?

At Capital Funding Financial, we’re 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 price takes about one or two weeks to finance 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 demand broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.

When finishing flip or rehabilitation job & a fix, what will 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 worksheet and timeline. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will need to see the borrowers expertise in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will even require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the security and not the credit score.

If you’re 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 advice.