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Thursday, January 3, 2019

Why Use Hard Money Loans

There are many reasons to use Colorado hard money loans. Understanding these uses can be a great help in growing your personal wealth.

The term Hard money loans in Colorado is often misunderstood by many consumers. They picture a less than scrupulous lender who might be working out of a shady office or back alley rather than a professional individual who is simply in the business of loaning money to make money. In some cases, the lender is a single person or in other cases, it is a group of people who are working together as a group. But the main difference is that this loan is coming from a private source and not a traditional bank or other lending institution.

One of the biggest benefits of using Hard money loans in Colorado is that the loan is secured with collateral rather than the borrower's creditworthiness. In many cases, a borrower will have a low credit score or no credit history and is unable to finance through traditional means. In addition, people who are recently divorced can have a difficult time reestablishing their credit and need another option when buying a home. And people who are self-employed, work freelance or have seasonal or fluctuating income can have a difficult time meeting the stringent requirements of a traditional lender when it comes to proving their income. But hard money offers this segment of the population a legitimate option for borrowing money to purchase a home or invest in the real estate market.

Another group of people who are fond of Hard money loans in Colorado are property flippers. These real estate investors know that finding a great property requires fast financing to secure the purchase. A bank is going to require a lot of documentation and time to process a loan even for an applicant with stellar credit. But a hard money lender is willing to process and fund the loan in a fraction of the time because the property becomes the collateral for the loan.

Stopping A Foreclosure

Homeowners who are at risk of losing their home due to a financial hardship are also going to benefit greatly from hard money. These loans allow the homeowners to use the equity that he or she has in the home to refinance in a sense and pay off their original mortgage. In some cases, the homeowner will then refinance into a new traditional mortgage at a later time or others will sell the home to pay off the hard money loan. But what this does for the homeowner is protect the equity that would have been lost had the mortgage company foreclosed and taken possession of the home.

Hard Money Rules

There are state and federal laws which forbid Hard Money Lenders in Arizona from lending to people who obviously have no way to repay the loan. But if you can meet the payments of the hard money loan then this is a solid and legitimate option for you. Even with a credit score below 600, borrowers can qualify for hard money and begin to rebuild credit or establish a new career in real estate.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC 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

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.

Wednesday, January 2, 2019

Pros and Cons of Hard Money Loans in Colorado

No loan is perfect for every person and every need. But understanding the benefits and drawbacks of Hard money loans in Colorado will help you to use them properly and to their greatest benefit.

Not everyone can qualify for a traditional mortgage from a bank. In some cases, the potential borrower does not have a good enough credit score or might not have an established credit history. Other times, a recent divorce could be the reason for the denial of a loan application. And the self-employed borrowers always have a difficult time verifying their income and convincing a bank to grant a loan request. But all of these people have the option to borrow from the less traditional but still legitimate private lenders who offer Colorado hard money loans.

Hard money loans in Colorado are asset-based loans which mean that the borrower has to provide collateral for the loan rather than have a high credit score to secure the loan. In most cases, the collateral is the property that is being purchased with the money from the loan. Less frequently, the borrower uses other assets, property or items of substantial value as the collateral on hard money loans in Colorado. But the benefit of securing the loan with a low credit score makes hard money very attractive to many borrowers.

In addition to being less difficult to get, hard money is also favored for their less challenging application process and fast funding. Because the lenders are private groups or individuals, both processes are much more expedient than traditional lenders methods. Rather than huge piles of documentation a hard money loan only requires a few documents to show income and banking history and information about the property. This cuts through a lot of the red tape that bankers request. And the approval is based solely on the value of the collateral so approval and funding can happen faster than a traditional bank.

The Down Side

Nothing is perfect and hard money is no exception. The fees for hard money are higher than a traditional loan and the time frame is much shorter as well. This can make the payments higher and be seen as a negative for some borrowers. In addition, it is not uncommon for these loans to have a clause that includes a pre-payment penalty if the loan is paid off early. But that is simply a way for the lender to be assured that he or she will earn a specific amount for the money that is being risked.

Know Both Sides

Hard money is an alternative that is not worth the higher price or higher payments to some borrowers. But it is also clearly an opportunity for other borrowers who have no other choice for a loan. The key to deciding to use hard money is knowing the total cost of the loan as well as all of the terms. With all of that information, borrowers can make a well-informed choice and know that hard money is a good solution to their lending needs.

Hard money loans in Colorado For Real Estate Investors

Getting into the real estate investment arena can be difficult. But Hard money loans in Colorado offer investors the funding needed to begin a new career.

Becoming a real estate investor is a great way to work independently, control your own hours and income and increase your earning potential. But the first hurdle to entering this field is a huge one which is impossible to overcome for many. Securing the money needed to make the first few purchases and completing the rehab projects can seem almost impossible unless you have a huge chunk of cash sitting in the bank. But Hard money loans in Colorado offer many people the opportunity they are looking for to get a few successful projects in their portfolio.

Hard money loans in Colorado are privately funded asset-based loans. That means that the approval for the loan is based on the value of the collateral being used to secure the loan rather than the borrower's creditworthiness and debt to income ratio. And the fact that these loans are funded by private lenders means that there is far less paperwork involved and a much shorter turnaround time than a traditional loan. Both of those factors work in favor of the real estate investor who needs a simple application process, fast approval and even faster funding to secure a great property.

In addition, these loans offer new investors the opportunity to grow rather quickly. Traditional lenders are going to see that borrowers already have a loan on one property and are going to decline any other loan requests based solely on the debt to income ratio. But with Hard money loans in Colorado being based on the value of the collateral, it is much easier to carry multiple loans on multiple properties. Not only does this increase the size of your business but it also increases your earning potential. Nothing is worse than finding a great property but passing on the deal because you have not completed another project and can’t secure a loan from a traditional lender.

Know The Risks

Hard money is not the perfect solution for everyone. These loans do charge a higher interest rate and can include more fees than traditional loans. So if you are on a really tight budget, then hard money could be too costly for you. And the shorter term of these loans can be challenging when you are new in the real estate business and are not as skilled at quickly completing each project and flipping the properties as fast as more experienced investors. And of course, there is the risk of losing the property if you default on the loan.

Understand The Potential

Hard money is an alternative that works for many real estate investors who take the time to learn the benefits and drawbacks to these asset-based loans. Having a good understanding of the terms and the potential risks is the only way to be sure that you are comfortable using hard money and that you understand and can meet your obligations as a borrower. But with a little research, you may determine that hard money is the tool that you need to begin a career in real estate investing.

Tuesday, January 1, 2019

The Risk In Hard Money Loans in Colorado

There is always a certain level of risk in any loan. Once you understand the risks involved in Hard money loans in Colorado you can decide if the benefits outweigh the risks.

Any loan has a certain amount of inherent risk. If you fail to make the payments for any reason or fail to comply with any of the other terms of the loan, then you could default on the loan and lose any collateral that has been used to secure the loan. In addition, defaulting on a loan will lower your credit score and make it more difficult to secure any type of traditional loan in the future. Understanding the risks of Hard money loans in Colorado is not going to make them go away but it will let you make a well-educated decision about choosing to use Hard money loans in Colorado as an alternative to traditional loans.

Hard money is an asset-based loan which means that as the borrower, you are agreeing to offer collateral on the loan. In the event that you default on the loan, then the lender becomes the owner of the collateral. In almost all cases of hard money loans, the collateral on the loan is the property that you are purchasing with the loan funds. So, in essence, you are risking the property if you fail to make the payments. One other bit of information makes this risk even more apparent. The loan that you get from a hard money lender is not going to be in the amount of the full purchase price of the property. You must make a down payment of anywhere from 205 to 30% of the purchase price to create instant equity. This equity provides security for the lender that the property will always be more valuable than the balance of the loan. So you are risking your equity on hard money.

In addition to risking the property, equity, and your hard earned money, there is also the added money that you invest for fees and interest. If you default all of your investment is gone because the lender is not required to share any of the proceeds from the sale of the property. You might only owe $10,000 on the loan but if you default and the lender sells the property for $100,000 he gets to keep it all.

Time Is Short

Hard money loans in Colorado are short term loans which will not normally exceed five years. Some loans are even written for terms as short as six months. This might appear to be perfect for a fast flip, but if you find major issues with the property or can’t find a buyer then six months can go by very quickly. The short-term can work against some borrowers.

Know The Terms

The only way to be certain that the risk of an asset-based loan is worth the reward is to fully understand all of the terms of the loan. Knowing the total cost of the loan and all of your responsibilities as a borrower will allow you to evaluate the risk and make a well-informed decision.

Tips For Success Using Hard Money Loans

As a new borrower in the world of hard money loans, there can be many confusing questions. But a few tips can ensure that you are getting a great deal using hard money.

Hard money loans in Arizona are a great tool for many borrowers who are having difficulty qualifying for a traditional loan or who are getting into the real estate investment business. Low credit scores or multiple loans can have an adverse impact on your application and can be very disheartening. But knowing how to use a hard money loan correctly can solve your loan issues very quickly.

Hard money loans in Arizona are short-term and are secured by collateral rather than the borrower's credit rating. So understanding this and knowing how to get a great deal from a hard money lender is important to secure your loan and your future. When you are shopping for a hard money loan, be sure to ask each lender for a complete list of all of the fees that he or she charges on a loan. This will ensure that you can calculate the total cost of each loan option to choose the most affordable loan. Also, beware of lenders who require a very large, non-refundable deposit. Many of these are not real lenders. Instead, these are scams and the person posing as a lender has no intention of ever funding any loans. He or she is just stealing application fees and possibly even personal information and identities from potential borrowers.

Another costly mistake is working with a person who is a broker but is not the actual lender. In these cases, you will end up paying fees to the broker who then passes you on to the actual lender. But paying the extra fees can make your loan much more expensive than it should have been. One way to be certain that you are working with the actual lender is to ask for a list of references and previous clients to speak to about their experiences. A legitimate hard money lender will be happy to provide you with this information and to have you confirm that he or she works in a professional and upfront manner.

Bait And Switch

When you are researching lenders, it is always best to request that all information be provided in writing. This is a good way to make sure that the lender does not offer a certain rate and then change it later after you have begun the process of completing the loan documents. In most cases, Hard Money Lenders in Arizona are very legitimate and are happy to provide this information in writing. If you find that your lender is not forthcoming with information, then that is a possible sign that you need to find a new lender.

Terms

Private lenders are free to set the terms of Hard money loans in Arizona as they see fit. Be certain that you request a complete copy of the loan document to review prior to signing it. If you are not familiar with loan documents then it is wise to have the agreement reviewed by a legal professional to be certain that you understand all of the terms such as late payment penalties, the definition of defaulting on the loan and any penalties for early loan payoff. Know how to shop for a loan is almost as important as knowing which type of loan will best meet your needs.

Warning Signs Of Bad Hard Money Lenders in Colorado

Hard Money Lenders in Colorado tend to have a less than great reputations because most borrowers do not understand who they are or what they do for a living. But there are a few warning signs that can steer you away from potential scammers.

Getting a traditional loan is simple in that you go to a brick and mortar bank location or a website and you know that you are dealing with a legitimate lending institution which is federally regulated. But Hard Money Lenders in Colorado are not as easy to locate as a bank or mortgage company. And you might not be able to tell legitimate Hard Money Lenders in Colorado from scam artists unless you are familiar with a few signs or giveaways that will clue you into the truth.

Every borrower wants to find a good deal and feel like a savvy business person, but there is a limit to what you can expect. Lenders are in business to make money and if the deal looks too good to be true then it probably is a scam. Some scams will actually loan you money but at a much higher cost than they initially explained to you. You will find that there are many hidden fees and even an increase in the interest rate under certain conditions. Get everything in writing when you are quoted a cost for any loan. Other lenders will claim very low rates and no additional fees after you pay a high application fee. Those are scam artists who will take your money and personal information and never be reachable again. Not only do you lose your money but they are also likely to try to steal your identity.

It is also smart to beware of new lenders in town. If the lender has no history then it is likely a person who collects application fees and then quickly changes business names to scam more potential borrowers. Check out every lender with the Better Business Bureau in your area and other agencies who oversee lenders in your state.

Read The Fine Print

Any legitimate lender will be open to providing you with a complete copy of the loan documents before you sign them. It is always wise to have loan docs reviewed by a legal professional. This gives you the opportunity to ask questions about your legal rights and what is expected of you if you sign the loan document. Less than reputable lenders will add in clauses about a single late payment being grounds for default or a huge increase in your interest rate. Invest the time and money to get a second set of knowledgeable eyes to look at all legally binding agreements before you sign them.

Pay Attention

Most people can very quickly evaluate how well they will work with a person they have just met. In the end, you are selecting a person who you hope to work with on many projects and for many years during your real estate career. So take the time to make a solid assessment of each of the potential Hard Money Lenders in Colorado, and then select the one who best meets all of your needs.