How to choose the best hard money lender in Winter Park

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Hard Money Lender FL Winter Park

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying collateralized asset. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary solution (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 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 more economical conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single 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 Demands Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan secured by a property in need of repairs is quite rarely funded by banks before it can be used; therefore the borrower uses a hard money lender settlement the hard money loan with traditional financing, 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. Yet, short-term lending will be provided by an exclusive lender to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a certain time period. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Therefore, there is certainly an enormous requirement for private lenders who look more at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. 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 determined by looking at a mix of variables such as: (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?

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

Can the loan fees be paid from your loan proceeds?

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

Will there be a prepayment penalty with hard money loans?

Normally hard money lenders in Winter Park Florida implement a 3–6 month minimum interest requirement. 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 condition is put in place so the lender receives at least a small return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no pre-payment penalty will be issued.

How fast 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 one or two weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an evaluation needed?

Yes, hard money loans generally need broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.

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

Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; hence the lender will want to find the borrowers experience 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 may also require income statement and a credit report in the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the security and never the credit score.

If you’re in need of 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 info.

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