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Saturday, January 5, 2019

TO AVOID MISTAKES WITH A ARIZONA HARD MONEY LOAN

There are a plethora of benefits, for an investor, from a Arizona hard money loan. However, if you find yourself making mistakes during the submission process you can miss out on great properties by delaying your funds.

The most popular feature of hard money loans is the swift funding—you can get your money right away. Real estate investors use hard money loans to be competitive in the market. Unfortunately, many borrowers make common mistakes and lose great opportunities. It is imperative that you are aware of these mistakes to prevent a disaster from happening to you.

COMMON MISTAKES

First and foremost make sure you are working with a reputable lender. Many mistakes can be avoided by working with an honest lender with a good reputation. Unfortunately, there are a lot of scam artists out there. Choosing the wrong lender can spell ultimate disaster for you. Make sure you research your lender. How long have they been in business? How many deals have they done in the last year? Are there good reviews for them on sites like Yelp? What are the payment plans that are available? Can they send you a proof of funds letter?

Once you find a lender you are comfortable with make sure you know how much to borrow. Hard money loans work differently than conventional loans from banks. With a bank loan you make a payment each month that counts towards both the money you owe and the accrued interest. With an Arizona hard money loan your monthly payments are interest only and the balloon payment is due at the end of the loan. So, make sure you don’t borrow more than you need because that money will be tacking on interest, as well. At the same time, you want to make sure you borrow enough. Not borrowing enough can slow down your project. Get estimates from your contractors and discuss loan amounts with your lender.

Make sure, once your contract is drawn, that you read the fine print. This is a financial document and needs to be taken with the utmost seriousness. You don’t want to be held accountable for things you weren’t aware of. For example, some lenders charge an outrageous late fee for the balloon payment—others charge a prepayment penalty. Make sure you understand everything before signing on the dotted line. A reputable lender will review the document with you and answer all questions you have. Be wary of lenders that rush you through the paperwork—that usually means they are hiding something in the fine print.

An in-depth research of lenders will only benefit your financial life. Finding an honest, reputable lender—that you can continue to work with—will not only make your project run smoothly, it will benefit you in future endeavors.

Unfortunately, there are some unethical lenders out there in the financial industry. Choosing the wrong lender can not only hurt your career, but leave you in a financial disaster. The right lender is the most important part of the real estate investing puzzle.

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.

The Cost of Hard Money Loans

Hard money loans in Colorado are just like any traditional loan when it comes to cost. But what you need to be aware of is that the lender is free to charge fees and rates that he or she chooses.

Most consumers are fairly familiar with the way a loan works. You are paying someone or some business to uses their money. In most cases, you are charged interest, and when borrowing a larger sum of money, you are required to pay additional fees. Hard money loans in Colorado work in much the same manner as most loans. But the key difference is that Arizona Hard Money Lenders are free to set the loan terms to pretty much whatever they decide. So it is very important to have all of the loan documents reviewed by a legal professional prior to the signing and closing of the loan.

The interest rate on hard money is normally a bit higher than a traditional loan, but that is a small price to pay if you are unable to qualify for a bank or mortgage company loan. You can expect to pay between 7 and 15 percent for a run of the mill hard money loan currently. But remember that the interest rate is up to the lender and that he or she might increase the interest rate if there is a great deal of risk involved in the loan.

In addition to interest, you can expect to pay a few fees as well. Most lenders will charge a fee for the property appraisal. This is to ensure that the amount that you are asking for is less than the property value and that the property is in good condition. Some Arizona Hard Money Lenders will charge points much as a bank does. This would mean that for each point charged you are paying 1% of the loan. This is a simple way to calculate fees without itemizing for all of the tasks included in processing and funding the loan. Other lenders will charge for each step in the process such as fees for loan processing, notary, documentation, and funding. Neither way is better as long as you understand all of the fees that you are paying and why you are paying them.

Total Cost of the Loan

It is always a wise choice to ask the lender for a written list of all of the fees that you will be paying for all hard money loans. It is similar to asking for a price breakdown when buying a car. This document will show you the total of the loan plus all fees and interest so that you can see the final cost of the loan. Having this number will allow you to compare your different options to select the most cost-effective loan.

Make The Best Choice

In most cases, you will evaluate all of the Hard money loans in Colorado on the total cost. But other factors such as the payment schedule and time to fund the loan could be important. The cheapest loan might not always be the smartest choice. In the end, you need to pick the hard money lender who offers you the best terms and costs to meet your needs.

WHY USE A COMMERCIAL HARD MONEY LOAN

Do you own a commercial property? Is your company losing money? Do you have less than perfect credit? Good news! You can still obtain an Arizona commercial hard money loan.

Astute business people know when their business is losing money they have to intervene before their business fails. Sometimes though, they don’t have the credit to take out a loan with a traditional commercial real estate loan. They may not have a significant amount of assets either. Fortunately the property they already have—their business—is usually enough for a Arizona Hard Money Lender.

Banks won’t touch a risky commercial loan—Arizona Hard Money Lenders will. This is why the interest is a bit higher when you take a loan through a Arizona Hard Money Lender. They are taking a large risk. Typically, Arizona Hard Money Lenders will charge anywhere from 9%-13%—whereas, a bank will charge closer to 7%.

Hard money commercial lenders primarily use the property as the security of the loan. In the chance that the borrower defaults on the loan that property can be foreclosed upon and the lender can sell the collateral. This is not what the lender wants to happen, but a loan has to be secured in some fashion.

Most commercial hard money loans are short-term loans—ranging from one to three years. The majority of the loan life is around one year. However, Arizona Hard Money Lenders have the flexibility to negotiate—unlike traditional banking institutions.

WHAT TO BE AWARE OF WHEN GETTING A COMMERCIAL HARD MONEY LOAN

As you research lenders there are a few things to pay close attention to in your contract. Be cautious of exit fees. An exit fee is a large fee that is charged to the borrower when the loan is paid off. Make sure the lender won’t charge a prepayment penalty—these are also known as prepays. These penalties arise when the borrower pays the loan off too early.

Also watch for high dollar late fees on the balloon payment. The balloon payment is a large payment due at the end of the loan. Instead of making the same monthly payment in hard money loans, you pay only the interest until the end of the loan. On the final payment date you will pay the loan in full. This is how Arizona Hard Money Lenders work, however make sure the last payment is one you can afford and are prepared to make. Some lenders will include an enormous late charge on the balloon payment—be sure you are clear about any late charge amounts with your lender.

Most lenders will pre approve you within minutes and fund you within two weeks.

Hard money loans aren’t just for business owners losing money or with bad credit. Commercial hard money loans can be an excellent option for your business growth. Your collateral can be just as valuable as your credit as you grow your business into a successful and profitable endeavor.

Friday, January 4, 2019

ELIGIBILITY OF ARIZONA SPEC HOME FINANCING

With a spec homes, builders don’t have clients, as custom home builders do. They are building a home with the intent to either sell it before or after it is finished. Builders require financing to purchase the materials and pay their crews—and many need the loan for the land, as well

There are many steps to Arizona spec home financing. First, have a marketing plan for your project. This plan should include the price you plan on selling your property, who your target audience will be—for example ‘over 50.’ The plan needs to include how your target audience will know the house is on the market. Will you be attending local real estate events? Will you hire a realtor? The bottom line is lenders want to feel confident you will be able to sell the home once it is built.

Another aspect of obtaining Arizona spec home financing is gathering all the financial documents necessary. This will include you bank account statements, all sources of income and the last 3 years of your federal and sate tax returns. If you are planning on working with a traditional bank, plan on much more documentation and a squeaky clean credit check with no bankruptcies. Generally, banks will want to see a successful track record.

WHY BANKS ARE NOT THE BEST CHOICE FOR ARIZONA SPEC HOME FINANCING

Will a bank lend to a borrower looking for Arizona spec home financing? The answer is, ‘sometimes.’ However, as stated above, a builder will face many challenges—and if this is one of their first spec homes, the answer is probably, ‘no.’ Even with perfect credit banks are much too weary to lend on these types of loans for newbies.

Hard money loans are an investor’s best friend. You can receive a same day approval. Unlike banks that can take weeks to even give you the approval needed to move forward with their very lengthy process. If you already own the land you will be building on, that work as your collateral for a Arizona Hard Money Lender—along with the property. As banks frown upon first-time builders, a Arizona Hard Money Lender will be objective and look at it strictly as “does this make sense?” With a hard money loan you can receive higher loan amounts of your spec home financing than a bank will offer. For first time builders or builders with marks on their credit report, spec loan financing will allow them to get the job done.

Construction spending is rising to its highest level in years.

There is a higher demand for new homes right now. This leads builders to search for quicker and more reliable funding than traditional bank lending. Arizona Hard Money Lenders can generally lend up to 90% and depending on the project they may fund 100%of the construction costs—as long as your project makes sense.

DIFFERENCES IN OWNER OCCUPIED AND ARIZONA NON-OWNER OCCUPIED LOANS

There are differences in mortgages when discussing owner occupied and Arizona non-owner occupied loans.

An owner occupied property is the property that is your primary residence—it is what you call home. A property can have up to four units, and as long as you live in one of them—that qualifies the property as an owner occupied property. If you have a second property outside of the county you live in that is a vacation home— that can qualify as an owner occupied property. This is all determined at the time you apply for a mortgage.

A mortgage that you take out on a property that is not your primary residence is defined as a non-owner occupied property. For example, any homes you buy that you rent out to generate income would be considered non-owner occupied property.

THINGS TO CONSIDER WITH OWNER OCCUPIED AND ARIZONA NON-OWNER OCCUPIED LOANS

Owner occupied properties are traditionally financed through a conventional mortgage—as long as income and credit requirements have been met. These loans usually have terms from 20-30 years and qualify for refinancing throughout the life of the loan. Depending on the borrower’s credit the interest rate can range from 3.75% to 5.5%—these rates change periodically. Most mortgages are on a fixed rate—meaning the payments and interest never change. Borrower’s typically give up to a 20% down payment, as well.

However, when taking out an owner occupied mortgage many borrowers use private money—or hard money—lenders. Because banks have strict requirements on mortgages there can be various issues even on owner occupied properties being financed with a conventional mortgage. With a hard money loan a borrower can skip the hassle of waiting on financing approval for a property that most likely will not be approved. Arizona Hard Money Lenders base the loan decision on the property as collateral. These loans make owning multiple rental properties possible. Unlike the banks who typically don’t allow more than 4 properties, a borrower can borrow for as many properties as needed as long as the collateral is there to back the loan. Banks also have higher credit requirements for property loans—a minimum of 620.

Arizona Hard Money Lenders will typically require proof of the last 3 months of income, last 3 years tax returns, along with proof of the collateral that will be backing the loan. The amount of the loan is determined by the borrower’s income, credit and will be weighed most heavily on the real estate that will be securing the loan.

Typically, Arizona hard money loans are an easy transition into a conventional mortgage. If that is part of your plan make sure to discuss this with your lender.

Yes, hard money loans have higher interest rates than traditional bank loans—but what they don’t have is lengthy approval processes and limits on owning property. If real estate investing is a career you are considering transitioning into make sure to check out a local Arizona Hard Money Lender.

Qualifying for Fix and Flip Loans in Arizona

Fix and Flip Loans in Arizona have grown in popularity as that segment of the real estate market grew. But borrowers must understand that the qualifications are different from most other loans.

The real estate market has been greatly influenced but the popularity of some fix and flip television shows. For many years, property rehabs were a small segment of the industry. But now that certain shows have presented this business as a get rich quick plan or a glamorous career, there are huge numbers of people trying their hand at fixers uppers and also needing Fix and Flip Loans in Arizona .

Most new flippers are eager to apply for Fix and Flip Loans in Arizona because they have heard that the process is fast and easy. But that is about all that they really think they know and need to know about the process. The truth is that no hard money lender is in business to lose money, so there are additional criteria that borrowers must meet to secure Fix and Flip Loans in Arizona .

The first big misconception that most borrowers have is that their credit score will have no impact on their ability to secure a loan. And while a great credit score is not critical to getting the loan, a terrible credit score will certainly cost you. A bad score is likely to increase your interest rate quite a bit, and also could lead to the lender offering you less money than you requested for the loan. As a rule, most Hard Money Lenders in Arizona are only going to be willing to work with a borrower who has a 550 credit score or better, and some will only work with 600 or more.

Experience is Critical

In addition to a certain amount of creditworthiness, lenders want to know that a borrower for a fix and flip loan has some experience in the flipping industry. The project house is the collateral for the loan, and an inexperienced flipper can destroy the value of the property and then run out of money to fix it making the collateral pretty worthless to the lender. Two or three months of bank statements will also show the lender that you have maintained a respectable balance, and are not trying to work on a shoestring budget.

Proof of the Deal

Hard Money Lenders in Arizona do not have a huge staff of subordinates who are filling their days with paperwork and loan document creation. The lenders want to know that you are seeking funding for a legitimate deal that you are working on. So they ask that you show the purchase contract from the seller and also the contractor bid that you have gotten for the work that will be done to the property. These not only show that the deal is legit, but they also show that you know what you are doing and are ready to proceed with the project once the loan is funded. Though fix and flip deals are not really as cool as they look on television, they can be a great way to make some money in the real estate industry if you are willing to do some work and make it happen.