How to choose the best hard money lender in Wellborn

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Hard Money Lender FL Wellborn

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset 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 mainly on the value of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a temporary 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 a person pick 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 cheaper conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance one 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 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. Yet, a private lender will be pleased to lend on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, banks really rarely finance a loan guaranteed by a property in need of repairs; consequently the borrower uses a hard money lender payoff the hard money loan with normal funding, and then rehabilitate and to purchase the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a personal lender provides short-term lending to the borrower to buy the property and lease it up. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently even quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for conventional financing. Consequently, there is an enormous importance of private lenders who look more at the value of the underlying asset in comparison with 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 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 upon 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” (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?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, financing processing fee, evaluation fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward provisions without all the hidden trash fees

Can the loan fees be paid from your loan proceeds?

Yes there’s a large 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 earnings.

Is there a prepayment penalty with hard money loans?

Usually hard money lenders in Wellborn Florida implement a 3–6 month minimum interest requirement. For instance, with a 6 pre payment penalty, if the borrower should happen 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 small return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, then no prepayment 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 one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an evaluation required when implementing?

Yes, hard money loans usually demand comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.

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

Besides the apparent 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 helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; thus the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the security and never the credit score.

If you are looking for 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 info.