Hard Money Loan Florida Gainesville
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary option (1–3 years usually) 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 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 funding or a hard money loan over a cheaper traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund 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 typically funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For example, banks quite infrequently finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower will use a hard money lender settlement the hard money loan with normal 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, a personal lender will provide short-term financing to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with normal funding. (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. So even quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional funding. Consequently, there’s a huge requirement for private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We normally 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 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 associated with asset based lending?
Hard money lenders in Gainesville charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, a loan processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward conditions without all of the concealed crap fees
Can the loan fees be paid from the loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid in the actual loan earnings.
Will there be a pre-payment fee with hard money loans?
Generally Gainesville hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives a little return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre payment fee will be issued.
How quickly 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed?
Yes, hard money loans typically require an assessment, broker price opinion, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing a repair & flip or rehabilitation job, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; so the lender will want to see the borrowers expertise in managing or performing property 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 to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly 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 information.
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