Hard Money Loan Florida Altoona
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 asset that is collateralized. 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 security for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short term option (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 a person choose a hard money loan (asset–based loan) over a conventional 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 funding: (1) Quick Funding– conventional banks take a 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 finance a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. However, an exclusive lender will be pleased to lend on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). For instance, a loan secured by a property in need of repairs is really seldom funded by banks before it can be used; consequently the borrower will use a hard money lender payoff the hard money loan with traditional lending, 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, an exclusive lender will provide short term funding to the borrower to purchase the property and rent it up. Once the property is stabilized for a time frame that is certain, 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 greatly on a borrower’s credit score, past income, and ability to repay the debt. So even quality borrowers including doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. So, there’s a huge requirement for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we generally 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 determined by looking at a mix of factors 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 associated with asset based lending?
Hard money lenders in Altoona charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, an application fee, assessment fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward conditions without all of the crap fees that are concealed and charges a very low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s 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 prepayment penalty with hard money loans?
Generally Altoona hard money loans have a 3–6 month minimum interest requirement. For instance, 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 your lender receives at least a little return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, subsequently no prepayment penalty will be issued.
How quickly can a typical hard money loan close?
At Capital Funding Financial, we’re a direct lender and have the ability to close loans within a days when given a complete loan package (credit report, income documentation, independent evaluation, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment needed when using?
Yes, hard money loans typically demand broker price opinion, an assessment, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When completing flip or rehab job & a fix, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the range 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 planned when performing a rehab; so the lender will need to see the borrowers expertise in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender will also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security rather than the credit score.
If you’re 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.
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