Hard Money Loan Florida Shady Grove
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the asset that is collateralized 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 primarily on the value of the asset used as security for the loan. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short term alternative (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 a person choose a hard money loan (asset–based loan) over a traditional 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– conventional banks take the absolute minimum of 45 days to finance 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 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 in need of repair. For example, a loan guaranteed by a property in need of repairs is quite infrequently funded by banks before it can be used; so the borrower will use a hard money lender settlement the hard money loan with normal funding, 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 private lender will provide short-term funding to the borrower to purchase the property and lease it up. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based exclusively 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 normal funding consistently turn down quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Thus, there’s an enormous need for private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we normally 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 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 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 in asset based lending?
Most hard money lenders in Shady Grove charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, a loan processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without each of the crap fees that are concealed and costs an incredibly low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from the actual loan proceeds.
Will there be a pre payment fee with hard money loans?
Usually Shady Grove hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 prepayment penalty, 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 so your lender receives a modest return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, subsequently 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 price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an appraisal required?
Yes, hard money loans typically demand an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehab project & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to see the borrowers expertise in performing or managing property repairs. The lender will release funds in draws and require an inspection. The lender will even require income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the security and not 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 info.
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