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Hard Money Loan Florida Homestead
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary 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 home.
Why exactly would a person pick 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 cheaper conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund a single 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 Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks quite infrequently fund a loan guaranteed by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender will give you short term funding to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time period, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for normal financing. Therefore, there is certainly a huge requirement for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We usually 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?
Hard money loan rates usually range from 10% all the way up to 15%. 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 involved in asset based lending?
Hard money lenders in Homestead 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, a loan processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward provisions without all the junk fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan earnings.
Is there a pre-payment fee with hard money loans?
Ordinarily Homestead hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 pre-payment 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 your lender receives 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, then no pre payment penalty will be issued.
How fast 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 evaluation, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an evaluation needed,?
Yes, hard money loans usually demand broker price opinion, an assessment, or comparative sales analysis. We order an unaffiliated appraisal.
When completing flip or rehabilitation project & a repair, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to see the borrowers expertise in performing or managing 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 even require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security and never 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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