Hard Money Loan Florida Chattahoochee
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 underlying collateralized asset. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short-term alternative (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person choose 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 funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance just one 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 commonly financed within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be happy to give on a property that either lacks cash flow or demands physical progress 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 really seldom funded by banks before it can be used; so the borrower uses a hard money lender settlement the hard money loan with conventional funding, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term funding will be provided by a private lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a particular period of time, the hard money loan will be refinanced by a commercial lender with normal financing. (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. Thus traditional banks for normal funding consistently turn down even quality borrowers for example doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. So, there’s an enormous need for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. 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?
The rate by the lender is dependent upon taking a look at a combination of variables 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” (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?
Most hard money lenders in Chattahoochee charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial costs a very low origination fee of only 2%* and offers straight forward provisions without all of the rubbish fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from your actual loan proceeds.
Is there a pre payment fee with hard money loans?
For example, 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 that the lender receives at least a little return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, then no pre payment fee will be issued.
How fast 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 appraisal, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
Is an evaluation needed when applying?
Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing flip or rehabilitation job & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; therefore the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security and never the credit score.
If you are 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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