Hard Money Loan Florida Bagdad
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a short term solution (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 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 cheaper conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a personal lender will be pleased to lend on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). For instance, a loan guaranteed by a property in need of repairs is quite rarely funded by banks before it can be used; consequently the borrower will use a hard money lender settlement the hard money loan with normal financing, and then to purchase and rehabilitate 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, an exclusive lender will give you short term funding 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 normal financing once the property is stabilized for a specific period of time. (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. Consequently quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal financing. Therefore, there’s a huge requirement for private lenders who look more at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we typically 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 looking at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?
Most hard money lenders in Bagdad charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, an application fee, evaluation fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without all the hidden crap 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 each of the fees (besides the application fee) are paid from your actual loan earnings.
Is there a prepayment penalty with hard money loans?
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 condition is put in place so the lender receives at least 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, subsequently no prepayment penalty 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 days when given a complete loan package (credit report, income documentation, independent appraisal, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an appraisal required,?
Yes, hard money loans typically require an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing flip or rehab job & a fix, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to see the borrowers expertise in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will even require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security rather than the credit score.
If you are 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 advice.
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