Hard Money Loan Florida Lithia
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a temporary alternative (1–3 years typically) 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 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 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 fund a development loan. Whereas, a hard money loan is generally financed 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. As an example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks before it can be used; so the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with traditional funding. 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 financing will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a certain time period, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for conventional lending consistently turn down quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Hence, there’s an enormous requirement for private lenders who look the value of the underlying asset when compared with 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 usually look for a 50% – 65% LTV in our loans. What that means is we generally 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 determined by looking at a combination of variables 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” (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 with asset based lending?
Hard money lenders in Lithia charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, an application fee, assessment fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without all of the hidden trash fees and costs an extremely low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid in the actual loan proceeds.
Is there a pre payment penalty with hard money loans?
Ordinarily Lithia hard money loans have a 3–6 month minimum interest condition. For example, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so that the lender receives at least a small yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, then no prepayment fee 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 appraisal, title commitment). The typical bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an assessment required?
Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing a fix & flip or rehab project, 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 information in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will need to find the borrowers experience 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. The lender will also require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the collateral 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 info.
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