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 mostly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary 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 someone choose a hard money loan (asset–based loan) over a conventional loan offered 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 affordable traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance just 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 commonly funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks very infrequently finance a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender to buy and rehabilitate the property, and then settlement the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short-term financing will be provided by a private lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a particular time frame. (3) Not based solely on credit or income– Traditional banks rely greatly 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 for instance doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Thus, there is an enormous need for 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 generally 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?

The rate by the lender is determined by taking a look at a combination of variables 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 amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, financing processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all of the concealed crap fees and costs an incredibly low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan earnings.

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

For instance, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place in order for the lender receives at least a little yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, then no pre payment penalty will be issued.

How fast can a hard money loan that is typical 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 assessment, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an appraisal required?

Yes, hard money loans usually require an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.

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

Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehab; therefore the lender will want to see the borrowers expertise in managing or performing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the collateral rather than 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.