One type of loan you need to be familiar with, as a buyer or a real estate investor, is an Arizona Hard Money Loan. These are short-term, higher interest loans that can be used when traditional financing either is unavailable or won’t work for your situation.
A typical Arizona Hard Money Loan will run you anywhere form 7.99% to 15% and anywhere from 3-7 points. Points are an upfront fee of the loan amount. Unlike traditional financing Arizona Hard Money Loans are short-term loans, which make them perfect for a fix and flip. These loans generally run from 6 months to 3 years, but depending on the lender can be stretched out to five years. Because of the higher interest rate and points an Arizona Hard Money Loan, per month, will be more expensive.
So, why would anyone use an Arizona Hard Money Loan? There are many reasons an Arizona Hard Money Loan will actually make you more money. Buying a distressed home that you plan on fixing up and selling is a prime example of a reason to use these loans. Banks do not typically lend on fix and flip properties; there are many reasons for this—first and foremost, if the investment property doesn’t work out, it is much easier to walk away from an investment than it is your primary residence. Bank loan terms are longer and they have lower interest rates—this is great if you are buying the home you will reside in, but why would you take a 30 year loan out on a home you are planning on selling within a year? Also, banks will not finance repairs. That means you will have to come out of pocket for any and all repairs. Banks also will not finance until all inspections have cleared—if something needs to be fixed, you either have to bargain with the seller to fix it or it comes out of your pocket. Banks require large down payments—20-25%. An Arizona Hard Money Lender finances on ARV (after repair value) or LTV (loan to value)—either way you are not looking at anything near what a bank requires.
The fix and flip example is the most popular reason investors use Arizona Hard Money Loans. There are more:
1) You have bad credit: Unlike banks, who approve based on credit scores and income—an Arizona Hard Money Lender bases approval on hard assets—the property.
2) Fast approval: Arizona Hard Money Loans can be approved within a day and financing available generally around 10 days or less. This is important to people wanting high demand properties. A seller will choose to work with hard money versus a bank—banks typically take a minimum of 30 days to close and can easily take 90 days. This quick close helps the buyer negate a lower purchase price.
3) Arizona Bridge Loan— You are selling your home, but don’t want to wait on it to sell to buy your new home. A hard money Arizona Bridge Loan can cover that—these are interest only loans, meaning you won’t pay a large payment until your house sells—when you have the money. These loans make it possible to own two homes, but pay one mortgage.
4) Obtaining financing when a bank won’t provide additional loans: Most banks cap the amount of loans to a borrower at four. Arizona Hard Money Lenders do not have to adhere to federal regulations and so there are not these types of limitations.
Arizona Hard Money Lenders want their deals to go as smoothly as possible. These lenders have flexibility that banks do not and so it is easier to work through a problem and find a solution with your lender. A reliable and experienced Arizona Hard Money Lender will always be honest in their opinion concerning a project—they want it to succeed as much as the investor.
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.