Many new investors fret over how they will find Arizona hard money lenders to get moving on their project financing. But here are a couple of simple ways to approach this:
REIA or MeetUp Meetings:
Often hard money lenders
will speak at local real estate events. If not, ask fellow members to see if they know any trustworthy lenders.
Real Estate Agent or Traditional
Lender: Ask that realtor, or mortgage broker, in your real estate network if they know a hard money lender you could do business with.
Google “Hard Money Lender”: Just be careful, there are some unscrupulous individuals out there. Be sure to ask for references and talk to fellow investors to get their opinion.
Working with Arizona hard money lenders
will be somewhat different than going through a traditional bank for financing. Hard money lenders are not regulated similarly to conventional financing institutions. The lack of regulations means the rules of the loan will be different. Borrowers will even have the opportunity to negotiate directly with lenders on the loan terms. Phoenix Hard money lenders
will decide what to accept at their discretion, specifically concerning credit scores, debt-to-income ratios, etc. Remember that the essential thing hard money lenders want is a return on investment. Melanie Cohen from Instaya
advises to “make sure that the property is a worthy investment and communicate its potential to your lender. Compared to a traditional loan, working with hard money lenders is more about investment potential than your financial standing
How Does Hard Money Lending Work?
To give you a general idea, this is the usual course hard money lending takes:
Find a hard lender near you
. Do not let the rejection of a bank loan drive you to desperation. Research and make sure the lender can be trusted. Do they have a legitimate website? Are they in good standing with their own investors? Do they have pending lawsuits over bad loans?
Arrange a meeting with the lender. This is also the time when you can inquire whether they specialize in a kind of investment property or if they have worked with projects previously that mirror yours. Assess the time frame specified for the loan and see if this is something you can work with.
Prepare a contract. Make sure that you are offering a good deal with a sound financial plan.
Inform the lender of your contract price. Most lenders are willing to fund 60 to 70 percent of the property’s ARV. The remaining 30 to 40 percent is up to you. You will increase your chances of getting approved if you already have this at hand.
Get the property appraised. The lender will either send a list of their trusted appraisers or have their own.
Prepare additional documents needed. Some lenders may require that you present other documentation, like W-2s, bank statements, pay stubs, etc.
Wait for lender’s approval. If it is a deal that the lender finds satisfactory, then they will inform you of the amount and terms for payment.
Consult with a lawyer. Make sure that you are legally protected, especially after getting the lender’s counter offer.
Close the loan. Typically, this will be done at a title company or a lawyer’s office. The lender will then put the money into escrow at the title company. The title company would make sure all paperwork is completed and that checks are issued to all parties involved. Additional costs may include any closing fees and property insurances.
More often than not, lenders grant money to properties that will not be in the market for long, that have good selling potential. Make sure your team budgets ample time to complete renovations. There’s no sense in coming up with unrealistic projections. This cannot only set you back financially but possibly burn a possible future relationship with your hard money lender.
Alternatives To Hard Money Loans
Arizona Hard money loans
are not the only form of financing with approval requirements that differ from a traditional home loan. Numerous alternatives may help you buy your next property:
Home Equity Loans: If you are trying to finance your second property (or an investment property), consider tapping into your existing equity with a home equity loan. The approval requirements are primarily based on the value of the property and the amount of equity you have built up. These loans are also associated with lower interest rates when compared to hard money loans.
FHA Loans: Federal Housing Administration (FHA) loans are an option for borrowers who do not meet the traditional criteria. FHA loans have lower approval requirements and do not consider past financial challenges (namely bankruptcy) during the application process. Read our guide to FHA loans to learn more.
VA Loans: Loans by the Department of Veterans’ Affairs require no down payment and have much lower approval standards. These loans are only provided to qualified veterans, active duty service members, and their spouses. The interest rates and application requirements are often much more favorable if you do qualify.
Learning what is a hard money loan for real estate acquisitions has become commonplace in the housing sector. If for nothing else, a hard money loan gives investors an edge over those using traditional financing methods. Not only should hard money borrowers be able to secure capital faster, but sellers will also favor their offers because they are made with cash. That said, if you are looking to fund a deal, you may not want to ignore hard money; it could be the one thing that gets you what you need.
Equal Housing Opportunity. This is not a Good Faith Estimate and this is not a Guarantee to lend and should not be considered as such. Costs, rates, estimates and terms can only be determined after completion of a full application. Actual payments will vary based on your individual situation and current rates. APR for loans vary from 7.99 – 29.5% and is based on Credit Score, Down Payment, LTV, Income. Mortgage rates could change daily. To get more accurate and personalized results, please call 623 582 4444 to talk to one of our licensed mortgage experts. Terms and conditions of all loan programs are subject to change without notice. Level 4 Funding LLC, 22601 N 19th Ave Suite 112, Phoenix AZ 85027, 623-582-4444 NMLS 1018071 AZMB 0923961 This e-mail is for the exclusive use of the intended recipients, and may contain privileged and confidential information. If you are not an intended recipient, please notify the sender, delete the e-mail from your computer and do not copy or disclose it to anyone else. Your receipt of this message is not intended to waive any applicable privilege. Neither this e-mail nor any attachment’s establish a client relationship, constitute an electronic signature or provide consent to contract electronically, unless expressly so stated by Dennis Dahlberg RI/CEO, Level 4 Funding LLC, in the body of this e-mail or an attachment. To the extent this message includes any tax or legal advice this message is not intended or written by the sender to be used, and cannot be used, for legal or tax purposes or advice.
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.