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 a borrower from a lender based primarily on the value of the asset that is collateralized 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 primarily on the value of the asset used as security for the loan. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a temporary option (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 someone choose a hard money loan (asset–based loan) over a traditional 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 financing: (1) Quick Funding– traditional 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 finance a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks quite seldom fund a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short term funding will be provided by a personal lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a particular time frame, the hard money loan will be refinanced by a commercial lender with normal funding. (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. Consequently quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. So, there’s a huge importance of private lenders who look 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 capital decision mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 dependent upon looking at a mix of variables 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” (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. The lender will then charge various fees for document preparation by an attorney, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward conditions without each of the concealed rubbish fees

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 all the fees (besides the application fee) are paid in the actual loan earnings.

Will there be a pre payment fee with hard money loans?

Normally hard money lenders in Tampa Florida implement a 3–6 month minimum interest prerequisite. 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 requirement is put in place so the lender receives at least a modest yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment fee will be issued.

How quickly 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 assessment, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal required when applying?

Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an appraisal. We order an independent appraisal on the subject property.

When completing a fix & flip or rehab job, what will the hard money lender require?

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to find the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will even require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral 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 advice.