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 primarily on the value of the underlying collateralized asset. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a short-term solution (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 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 conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance just one 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 typically financed within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, banks quite rarely fund a loan guaranteed by a property in need of repairs; so the borrower will use a hard money lender then, and to buy 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. However, an exclusive lender will provide short-term financing to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan with normal lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for normal funding. So, there’s a huge importance of private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we normally lend out 65% 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 on taking a look at a combination of factors for example: (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 with asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, appraisal fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all the hidden junk fees and costs an incredibly low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

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

Can there be a pre payment penalty with hard money loans?

For example, with a 6 prepayment 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 your lender receives a little yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee will be issued.

How quickly 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.

When employing is an assessment required,?

Yes, hard money loans typically require broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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

Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will need to find the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender may also require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the security and never 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.