Hard Money Loan Florida Freeport
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 asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short-term 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 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 financing or a hard money loan over a more affordable traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance one 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 commonly financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, a loan guaranteed by a property in need of repairs is really infrequently funded by banks; so the borrower uses a hard money lender payoff the hard money loan with normal lending, and then to buy 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. Yet, short-term lending will be provided by an exclusive lender to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a particular time period. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal lending consistently turn down even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Therefore, there’s a huge importance of 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. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We generally 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 dependent on taking a look 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 involved in asset based lending?
Hard money lenders in Freeport charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by a lawyer, an application fee, evaluation fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial costs an extremely low origination fee of merely 2%* and offers straight forward terms without all the rubbish fees that are concealed
Can the loan fees be paid from the loan proceeds?
Yes 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 proceeds.
Will there be a pre-payment fee with hard money loans?
Typically Freeport hard money loans have a 3–6 month minimum interest prerequisite. 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 so your lender receives at least a little yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after half a year, then no prepayment fee 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 appraisal, title commitment). The typical bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation needed,?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an independent appraisal on the subject property.
When completing flip or rehab project & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehab; so the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the collateral and not 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 info.
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