(If you have never used a hard money lender, then you will not understand the qualifications that are required. But following these tips can help you to secure Arizona Hard Money Loans.)
As compares to traditional loans, Arizona Hard Money Loans are very easy to qualify for. But there are certain things that a lender will look for when deciding if he or she will fund a loan and also the interest rate that will be charged for the loan. The primary concern is the value of the collateral property, but there is also some concern with regards to the experience of the borrower and knowledge of the real estate industry.
It might seem odd, but money is a major concern even when you are asking to borrow money. The lender will need to be sure that the borrower has the money to make the down payment which could be as much as 25% to 35% of the cost of the property. In the case of a commercial property purchase, the down payment could even be 40% of the cost of the property. In addition, the lender will want to know that the borrower has a cash reserve to fall back on in the event of an unforeseen issue.
Submitting the borrower's track record of successful projects is a great way to offer the lender some security in the borrower's experience and knowledge. It is important that past deals have been completed on time and on budget. This will help to keep the interest rates down as there is less possibility of a default on the loan. Being new to real estate investing will not preclude a borrower from securing a loan, but it should be expected that the lender will charge a higher interest rate and could require more documentation to demonstrate a well-conceived plan for the project.
Exit Strategy
Finally, the lender will want to see an exit strategy for the project. This is a detailed plan showing the borrowers plan for repaying the hard money loan. The short term of Arizona Hard Money Loans can make it very challenging to repay them on time. Borrowers need to have a solid plan to finish the project to make the final payment, or balloon payment, that is normally the close of a hard money loan. The exit strategy will also include contingency plans in the event of time overrun or budget overrun. Normally, it is the borrower’s cash reserve that is tapped to correct these issues.
Final Approval
Hard money loans are not as complex as they might initially appear. The lender simply wants to access the risk involved in the loan and to know that the property will have enough value to cover any outstanding balance on the loan should the borrower default. The information about work experience and past project experience is used more for determining the interest rate for the loan and the fees that will be involved in writing the loan. It is also important to understand that after completing several loans with a lender, the process can become even more streamlined and fast as you have developed a strong working relationship with the lender.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
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.
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