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Saturday, February 9, 2019

5 Tips When Getting Hard Money Loans

(Applying for a loan always feels a little stressful. But following these five tips can help to ensure success when applying for Hard Money Loans in Texas.)

Arizona Hard Money Loans are a great financial tool for funding a fix and flip project, a new construction, a move to a new house prior to the sale of your current house or even a new business startup. But even with the streamlined application and approval process of hard money, having a few tips when preparing for your loan application can provide a great deal of peace of mind.

It might seem odd at first, but being liquid when you are asking for a loan is very helpful. Obviously, you do not have the money saved to make the purchase of the property, but it is important that you have money available for contingencies such as additional damage or repairs needed or a time overrun causing you to carry the loan for longer than expected. In addition, this cash will be needed to make the down payment and pay any upfront costs for the loan such as appraisal fees.

It is also important that you understand that private lenders are going to charge a higher interest rate than a traditional lender. Knowing this can help to avoid a surprise as you review the loan offer. In addition, as you prepare to seek hard money, you should know that even though a high credit score is not mandatory, it can help you get a better interest rate. Lenders view a higher credit score as a more financially responsible borrower and as such, they represent a lower risk and are rewarded with lower interest rates.

Loan To Value

The loan to value ratio is what will determine how much money you can receive when requesting Hard Money Loans in Texas. Basically, this means that the loan is only going to be for a specified percentage of the value of the collateral. Most lenders will offer a 70% LTV but others will go as high as 80%. Your credit score and cash reserve can be a factor in this determination as well. Most lenders are open to some negotiation in this area when the borrower demonstrated stale finances.

Plan For Success

Having an exit strategy is also an important step in the planning phase. This is basically how you plan to get the money to repay the loan. Your first choice would be to sell the property when the renovation is completed. But in the event that it does not sell quickly, it is wise to have a backup plan such as renting the property until it sells or offering a rent to own. And finally, don’t limit your options to a single lender. It is always smart to have a few choices when selecting any service provider. Arizona Hard Money Loans are simply a tool that is being provided by a service provider, a lender, and should be compared to ensure that you get the best value.

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.

Who Are Hard Money Lenders?

(Most of the world is not familiar with the concept of hard money lending or who Arizona Hard Money Lenders are. But a basic understanding can help to clarify the process, the benefits and the lenders.)

Arizona Hard Money Loans are also known by many different names such as bridge loans, short-term loans, and asset-based loans. And all of these names describe the same loan. These short-term loans are also considered to be non-traditional loans simply because they are provided by a private lender and not a bank or mortgage company which is also called a traditional lender. The key point or factor in this loan is that it is funded by a private lender. These lenders are called Arizona Hard Money Lenders.

The term can refer to a single private lender or a group of private individuals who work together to provide private loans. But these loans are never funded by a lending institution. One of the greatest benefits to borrowers is the simplified process of working with the private lender as opposed to the complicated process of applying and qualifying for a traditional loan. The lender will evaluate the request for a loan based almost solely on the value of the collateral being offered to secure the loan. This makes the process much faster and less stressful for both the borrower and the lender.

In addition to being easier and faster to work with a private lender, it is not uncommon for Arizona Hard Money Lenders to be very willing to work with borrowers to create customized loan terms. These terms can include a specific length of term for the loan, a custom payment schedule or even a lower interest rate when a large down payment is made on the property. This creates greater instant equity in the property and provides added security to the lender making a lower interest rate a possibility.

Finding A Hard Money Lender

If you are new to the process of hard money lending, then it can be best to select a local lender. This will allow for face to face meetings and ample ability to discuss and understand the process and your responsibilities as the borrower. An Internet search for private lenders or Arizona Hard Money Lenders in my area will provide a starting point. Then, a few quick phone calls can help to narrow your search.

What To Ask Potential Lenders

As you narrow your search for a private lender, it can be helpful to pose the same questions to all potential lenders. Asking about a full list of fees for all loans and well as a range for interest rates is always important. Knowing the cost is a major factor in selecting a lender. Also, ask for specifics on the projects that the lenders specialize in and their willingness to meet in person to work on your loan. Having this information will help you to evaluate potential lenders and select one who can best meet your needs for your current project and possibly even as a long-term lending associate.

Understanding The Terms for Arizona Hard Money Loans

(Arizona Hard Money Loans might sound a little shady until you learn what they are designed to offer and the terms for these loans. With this information you can decide if hard money is the solution you have been looking for.)

For the most part, Arizona Hard Money Loans are short-term loans which require interest-only payments until the end of the loan term. This might sound too good to be true, but this is a very basic explanation of how these loans work. What is also important to know is that the interest rate on these privately funded loans is over 10% and can be as high as 15% or more in some cases. But if you are willing to pay that higher interest rate, then hard money will offer you some benefit that will never accompany a traditional loan.

Being funded by a private lender eliminates the process of your loan application going to an underwriting department for an evaluation and potential approval. The lender is the person who will decide the merits or your request and whether or not the loan will be approved and funded. In addition, you have the opportunity to work with the lender to agree to mutually beneficial terms in many cases. These negotiable points can include the payment schedule, how the fees are charged and what the fee structure will be and even to some extent the length of the loan.

A basic definition of a short-term loan is one year but there are cases where a lender will carry the note for up to three years. In other cases, the loan could be as short as six months. It is always important to request that the lender note in the loan documents that there is no penalty for early repayment of the loan.

Fees and Rates

Most lenders will evaluate each request based on the merits of the project and the potential for success. If the project appears to be riskier, then the interest rate will be higher as will the points on the loan. Higher interest rates can also be expected if the borrower has an unstable financial history. But all of these points can be negotiated with the lender unlike with a traditional bank. Borrowers could offer to increase their down payment amount to secure a slightly lower interest rate. This is appealing to the lender as it increases the instant equity in the project and adds security to Hard Money Loans in Texas.

Qualifying for Hard Money Loans in Texas

Each lender could have a slightly different list of documents that he or she requires for a loan application, but there are some items that are likely to be requested. These include a few personal bank statements, the purchase contract for the property, a contractor bid and scope of work for the project, and a list of the borrowers past projects. All of this information will help to determine the potential for success or failure of the project. The lender will also want to know that the borrower has the cash or other means to cover the down payment on the property and the costs and fees for the loan and the purchase transaction. With a basic understanding of the terms of hard money, you can decide if this could be a good option for your next real estate investment purchase.

5 Reasons To Use Hard Money Loans

(Arizona Hard Money Loans are a very useful financial tool for many borrowers. And there are several reasons that hard money can be a great option.)

As soon as a person begins to research Hard Money Loans in Texas, the first bit of information to jump out is that the interest rate is higher than that of a traditional loan. Current hard money interest rates are somewhere between 10 and 15% for most borrowers. But paying the higher interest rate is a much better choice than missing an opportunity in most cases. Arizona Hard Money Loans are not just for people with poor credit, though they are a viable option for them. Many other borrowers choose to use hard money for its other benefits.

Hard money is funded by a private lender so one of the biggest benefits to borrowers who are real estate investors is the speed for approval and funding. The process is much faster because the lender is primarily interested in the value of the collateral and not the credit history of the borrower or his or her current credit score. The property evaluation will be used to determine the amount that the lender is willing to loan the borrower. The loan to value rate is almost always around 70%, meaning that the borrower can request a loan for 70% of the property value and no more. This process is fast and simple making hard money a viable option for a fast deal.

Arizona Hard Money Lenders are also much more flexible than the large banks and mortgage companies. There is no underwriting department who sets the terms for the loan. The borrower and the lender can sit down and agree to terms that are mutually beneficial. This can include the length of the loan, the repayment schedule and even the fees and other costs associated with the loan. In some cases, the lender will even lower the interest rate if the loan to value ratio is lower than 70% as there is more instant equity in the property. All of this flexibility can make a private lender a very valuable resource.

Easy Approval

Many borrowers fail to qualify for a traditional loan due to bad credit or even a high debt to income ratio. And in some cases, this is a sign of financial instability. But for a real estate investor, it is not unusual to be carrying multiple loans for multiple projects. Traditional lenders have no way of accounting for the types of debt being carried to offer these investors and exception. However, Arizona Hard Money Lenders will overlook this in many cases.

Multiple Benefits

Arizona Hard Money Loans offer many benefits to meet a variety of borrower’s needs. The flexibility to customize loan terms, the fast approval and funding and the less stringent personal credit qualifications help many consumers and real estate investors who need to borrow money. Private lenders are very willing to work with most borrowers and will evaluate requests to determine what they feel is a fair interest rate and cost for the loan being requested.

Friday, February 8, 2019

Top 5 Criteria Needed To Secure Hard Money Loans

(Arizona Hard Money Loans have different qualifications than traditional loans. But these few tips can explain what you need to secure a hard money loan.)

Because Arizona Hard Money Loans are asset-based loans, the collateral for the loan is the primary concern of the lender. But he or she is also very interested in the borrower’s ability to make the loan payments and his or her ability to manage the project to a successful completion. This might sound like a lot to ask someone to include in a loan application packet, but it is really far less complicated than a traditional loan application.

The borrower's ability to repay a substantial loan is obviously important to the lender. For this reason, many lenders will ask to see two years of tax returns as well as a personal financial statement. This demonstrates long-term income as well as the borrower's current debt to income ratio. Both of these will help the lender determine the borrower’s ability to repay the loan as well as overall financial stability. The more stable the borrower's finances, the better the interest rate is likely to be on Hard Money Loans in Texas.

The property resale value is the third critical piece of information that the lender will examine to determine if the request will be approved. In the case of a fix and flip, this will mean estimating the property value after the repairs and renovations are completed. In addition, the lender will want to know an estimated cost for the repairs to know that the property will still turn a profit and allow the borrower the ability to repay the loan.

The Borrower’s Experience

Having a borrower who has experience in fix and flip projects, rental property management or other real estate investments will provide the lender with greater confidence in the successful outcome of the project. Managing these types of projects requires skill and experience to avoid making costly mistakes. When the project is not managed correctly, time and money are lost making it far more difficult for the borrower to repay the loan. The lender wants to recover his or her investment in cash and not be forced to take possession of the collateral to recover his or her investment.

Have A Plan

Organization and professionalism are both very important when seeking hard money loans. The loan application packet will be the first tool to demonstrate a well-planned project. Not only should this packet include information about the borrower and his or her company, but it should also provide lengthy details about the project. Include the building plans and renovations, a cost estimate for renovations and the necessary timeline for the completion of the renovations. It is also helpful to demonstrate that there are contingencies in place in the event of a cost overrun for additional issues with the property or a slower than expected sale when that project is completed. All of this information is important when determining the profitability of a property and should be completed before making a purchase even if the lender does not ask to see the documents. But including this information can help to secure a more favorable interest rate or other loan terms.

Tips For Securing Hard Money Loans

(Securing Arizona Hard Money Loans is not the same process as getting a traditional loan. But the good news is that this is a much easier process.)

Almost every consumer knows the process for securing a traditional loan for a mortgage or other financial need, but they also know that it involves a great deal of time and documentation just to get the application process started. But most borrowers are not at all familiar with the process of securing Arizona Hard Money Loans or even understanding what these loans can offer.

A hard money loan is also known as an asset-based loan because there is collateral required to secure the loan. In most cases, the collateral is the property that is being purchased, but it can be other property that the borrower owns if the loan is for a business startup or other need. What this means for borrowers is that the lender will be more interested in the collateral and its value than he or she is about the credit score or creditworthiness of the borrower. This is not to say that a very low credit score is not going to have a negative impact on the interest rate, but it won’t be a deal breaker in most cases.

When preparing to request Arizona Hard Money Loans it is important to prepare all of the documents with as much care and detail as you would for a traditional loan. But the list of required or recommended items is far shorter for hard money requests. It is not uncommon for a lender to request W-2s, paystubs or bank statements to verify income or employment but they are not going to require years’ worth of documentation. Documents about the property will be more critical.

Demonstrate Your Preparation

Obviously, you will be supplying photos and a financial evaluation of the collateral property, but there is more that you will need to show the lender. Prepare a detailed outline of the project which will include the renovations and repairs that you plan to make, the cost of these upgrades and the timeline for completion. It can also be beneficial to include a list of the contractors that you will be working with and list their experience level. Include some documentation for comps in the area that will support your expected upgraded value of the property as well. This can justify the sale price that you are expecting and demonstrates your plan for repaying the loan.

Sell Yourself

The success or failure of Arizona Hard Money Loans often lies within the experience level of the borrower. Demonstrating your past experience managing real estate investment properties, renovations or fix and flip projects will provide the lender with a higher comfort level in the potential success of the project. If you are light on experience, be sure to include a very detailed contingency plan in the event that the renovation uncovers additional issues or that the property does not sell as quickly as expected. This can be a plan to rent the property as well as documenting savings or other funds that will be used to carry the loan payments during the extended ownership of the property. Using these tips to prepare a hard money loan request will greatly increase the number of opportunities that you will have to choose from when seeking a loan.