Hard Money Loan Florida Ocala
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are normally 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 dwelling.
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 funding or a hard money loan over a cheaper traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual 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– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For 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 uses a hard money lender settlement the hard money loan with traditional lending, 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. However, temporary lending will be provided by a personal lender to the borrower to buy the property and lease it up. Once the property is stabilized for a period of time that is particular, 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 greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for conventional financing consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who have high incomes but also have lots of debt. Therefore, there is certainly an enormous importance of private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We typically 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?
The rate by the lender is determined by looking at a mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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 Ocala charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by a lawyer, an application fee, assessment fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all the hidden junk fees and costs an incredibly low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes there’s 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.
Can there be a prepayment fee with hard money loans?
Normally Ocala hard money loans have a 3–6 month minimum interest requirement. For instance, 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 condition is put in place in order for the lender receives at least a modest yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment penalty will be issued.
How fast can a hard money loan that is typical 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 assessment, title commitment). The typical bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment needed when using?
Yes, hard money loans typically require broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehab project & a fix, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehab; so the lender will need to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. 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. However, hard money lenders focus largely on the asset value of the security and never the credit score.
If you’re looking for 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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