WHAT IS PRIVATE MONEY LENDING?

Private money lending in Arizona is when a private individual or organization lends money to a company or individual. This type of lending does not adhere to traditional qualifying guidelines, as banks must do.

Everyone is familiar with what a mortgage is—when a bank lends money to purchase a property or for renovations of a property. But, where does an individual go when a traditional mortgage won’t work for them? Many times borrowers are denied a conventional loan because of their credit worthiness or income. Other times the borrower may not have the time to wait, sometimes months, for approval from the bank.

WHY USE PRIVATE MONEY LENDING?

Because these loans are funded by private investors versus traditional banks-they are referred to as ‘private money loans.’ The loans are based almost exclusively on the value of the property instead of the borrower’s credit worthiness or financial history. The loan amount is determined by the loan-to-value ratio (LTV). There are many reason when a private money loan is the better alternative.

• You don’t have enough private financing from friends and family.
• Your credit score is not high enough and your financial history doesn’t meet traditional lender requirements.
• You have a property investment opportunity and don’t have the time to go through the lengthy bank loan process.
• You want to fix and flip and need quick access to funding.

Although Private money lending in Arizona does not have the

strict guidelines as traditional lenders, there are still requirements.

Private money lenders are concerned with the value of the property that will serve as the collateral more than your credit. However, individual terms will depend on the lender you work with and your unique situation. Most private money lenders only work in certain geographic areas—so, look for a local lender.  Your interest rate will depend on your experience. As you gain experience, your lender may offer lower rates—find a lender you like and stick with them. Property type makes a difference, as well— is this a condo, duplex, single family residence).  And, your business plan—along with a scope of work and insurance information— will add into the equation of your terms. As with traditional banks, private money lenders do have an underwriting process. Fortunately, this process is much faster than a traditional bank’s underwriting process. It doesn’t take long to be approved and receive your funds due to the speed of the underwriting process. After pre-approval the private money lender will order an appraisal of the property. As long as the property meets lender criteria the money will be dispersed for the property. Private money lending in Arizona is quick and helpful. It is beneficial for borrowers to work with either a local lender or a lender that is familiar and comfortable with the geographic area you are looking to purchase your property. Private money lenders build on relationship—the more you work with your lender, the more money you will both make.