How to choose the best hard money lender in Wesley Chapel

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Hard Money Lender FL Wesley Chapel

What’s 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 collateralized asset. 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 worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a short term option (1–3 years typically) 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 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 conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single 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 generally funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to give on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, banks very infrequently finance a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, temporary funding will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with conventional lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for normal funding consistently turn down quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. So, there is a huge requirement for private lenders who look 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 primarily on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we usually lend out 65% of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent upon looking 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 associated with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, an application fee, appraisal fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all of the rubbish fees that are hidden and costs an incredibly low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan proceeds.

Will there be a pre-payment penalty with hard money loans?

For example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for the lender receives at least a modest yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently 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 evaluation, title commitment). The typical bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an appraisal needed,?

Yes, hard money loans typically need an assessment, broker price opinion, 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 will the hard money lender require?

Well besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will need to see the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security and never 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.

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