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 worth of the underlying asset that is collateralized. 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 mostly 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 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 cheaper traditional funding: (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 fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, banks quite rarely fund a loan guaranteed by a property in need of repairs; therefore the borrower will use a hard money lender payoff the hard money loan with normal lending, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a private lender will give you temporary financing to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a period of time that is certain, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional financing consistently turn down quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Thus, there is certainly an enormous need for private lenders who look more at the value of the underlying asset compared to 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 typically look for a 50% – 65% LTV in our loans. What that means is we generally 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 dependent on taking a look at a mix of variables 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 subsequently charge various fees for file preparation by an attorney, a loan processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward terms without all of the concealed junk fees

Can the loan fees be paid from your loan proceeds?

Yes there is a huge enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid in the actual loan proceeds.

Is there a prepayment fee with hard money loans?

For 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 the lender receives at least a little return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then no pre payment fee will be issued.

How fast can a hard money loan that is typical 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 assessment, title commitment). The typical price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when implementing?

Yes, hard money loans generally require 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 fix & flip or rehab project, what’ll 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 capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will want to find the borrowers expertise in managing or performing real estate 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 income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the security and never the credit score.

If you are in need of 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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