Are you in a circumstance where you are being denied a residential mortgage? There are many circumstances when a borrower is denied this type of mortgage from both credit unions and banks. When the person seeking a loan has little or no alternatives, they will often turn to a residential hard money lender to obtain a mortgage on the borrower’s primary residence. Some of the reasons a borrower may turn to this type of lender are:
The borrower has bad or poor credit
If the borrower has had a recent loan modification, foreclosure, short sale or bankruptcy
If the borrower has two years or less of current employment
If the borrower is self-employed
A bridge loan is needed by the borrower for a primary residence
In some instances, a borrower goes through the approval process with a conventional residential mortgage lender, and the lender is not able to perform while in escrow. The borrower then searches for a private owner-occupied hard money lender to secure financing through. The lender is able to provide fast approval and funding which will help prevent the borrower from losing the property they have a contract on. Once the escrow closes, the property is secured, and the borrower can refinance with a conventional mortgage company.
Most owner-occupied hard money lenders will not consider lending for your primary residences because:
Additional documentation is required
The lender is required to obtain additional licensing
Regulators will exert firmer regulations
The time to fund the loan increases since there are mandatory recession periods
Investment loans have far greater lender risks than owner occupied mortgages
Arizona Owner-occupied hard money lenders are subject to Federal regulations. Some of these regulations consider Dodd-Frank. The Dodd-Frank act requires the lender to verify the borrower’s income and expenses. Paystubs, tax returns and W2’s are ways the borrower can verify their income. Debt to income (DTI) must be kept under certain levels by the borrowers. Car payments, other mortgages, credit card payments and other debts will be considered. Also included in this ratio will be the new mortgage obligations, (taxes, mortgage payment and insurance).
The owner-occupied Arizona hard money loans are intended for short term use, generally three to five years. Most lenders will require the borrower to have a plan in place to obtain long term financing.
A hard money loan can offer borrowers with credit issues time to repair their credit report—and not lose their chosen property. Others may be postponing obtaining a conventional loan until the mandatory waiting period for negative credit events has passed. These events may include short sale, bankruptcy, loan modification or foreclosure. If the borrower’s property has enough equity and there currently is a first (1st) mortgage and the borrower does not qualify for a conventional second (2nd) mortgage, then the borrower can consider a hard money lender. This may be a prudent decision if the proceeds of the second mortgage is used to pay off high interest rate credit cards or pay down other high interest debt.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.