Hard Money Loan Florida Wewahitchka
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are generally 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 dwelling.
Why exactly would a person pick 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 financing or a hard money loan over a cheaper traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance 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 typically 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. Nonetheless, a private lender will be pleased to loan on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan secured by a property in need of repairs is very seldom funded by banks; so the borrower will use a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short-term funding will be provided by an exclusive lender to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with normal funding once the property is stabilized for a specific time frame. (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 quality borrowers including physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Hence, there’s an enormous need for private lenders who look at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly 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?
The rate by the lender is determined by 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” (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 involved in asset based lending?
Hard money lenders in Wewahitchka charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, appraisal fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of just 2%* and offers straight forward provisions without all the crap fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes there’s a big enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid in the actual loan earnings.
Will there be a pre-payment penalty with hard money loans?
Typically Wewahitchka hard money loans have a 3–6 month minimum interest requirement. For instance, 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 in order for the lender receives 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, subsequently no pre payment penalty will be issued.
How quickly 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 one or two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment required when implementing?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. 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 apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; hence the lender will need to see the borrowers expertise in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender may also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly on the asset value of the collateral 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 info.
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