Hard Money Loan Florida Kissimmee
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying collateralized asset. 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 mostly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short-term solution (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would someone 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 conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single 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 generally financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, a loan guaranteed by a property in need of repairs is really seldom funded by banks before it can be used; therefore the borrower uses a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with conventional funding. 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 provides short term lending to the borrower to purchase the property and rent 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 traditional lending. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for conventional funding consistently turn down quality borrowers like doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Hence, there is an enormous need 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. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 looking at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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 Kissimmee charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, a loan processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of only 2%* and offers straight forward provisions without all of the crap fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan proceeds.
Will there be a prepayment fee with hard money loans?
Usually Kissimmee hard money loans have a 3–6 month minimum interest condition. For example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives at least a modest return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after half a year, then no pre-payment 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when using?
Yes, hard money loans generally demand comparative sales analysis, broker price opinion, or an assessment. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing a fix & flip or rehabilitation job, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehab; thus the lender will want to see the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report 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 information.
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