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Monday, March 18, 2019

The Basics of Arizona Hard Money Loans

(Understanding hard money loans and asset-based lending is important for all consumers. It might not work for everyone, but it is a good option to know about.)

As a consumer, you might only know about the more traditional types of lending such as a bank or mortgage company. But there are many other options available if you know where to look and understand how the loans work. Arizona Hard Money Loans are granted more on the merits or value of the collateral property than they are based on the borrower's personal credit score. For this reason, Arizona Hard Money Loans are also sometimes referred to as asset-based loans. This might sound like a very unorthodox type of loan, but once you understand the purpose of these loans and how to use them most efficiently, you will discover that hard money has its place in the world of finance.

It is also important to know that hard money is not something that you can go to a bank and request. Hard money is funded by a private lender, rather than a traditional lending institution. The lender could be an individual or even a small group of people who work together to provide hard money to borrowers. The other important bit of information is that these loans are not long-term like a traditional 15 year or 30-year mortgage. Hard money is normally borrowed for a year or two at the most, but the terms of a loan can be as short as a few months depending on the needs of the borrower.

As you might have guessed, coming from a private lender and with a much shorter loan term than a traditional mortgage, these loans carry a higher cost. In most cases, the interest is several points higher than a bank loan and the fees for the loan can be more as well. But there are many benefits to using a private lender to secure an asset-based loan.

Benefits of Hard Money

There are three main benefits to hard money that make it worth the higher cost of the loan. Because you are working with a private lender and not a bank, the loan is processed in a fraction of the time of a traditional loan. Speed is a huge benefit to many borrowers. In addition, private lenders can be far more flexible than a bank when it comes to the terms of the loan. This is also a great benefit to many borrowers. And finally, having the loan approval based on the value of the collateral and not your personal credit score means that Arizona Hard Money Loans are easier for many people to secure.

Understand What You Are Signing

The most important part of any loan process is that you have a clear understanding of what you are signing and what is expected of you. Because asset-based loans can be customized, you need to verify all of the terms with your lender and be sure that you understand the total cost of the loan before you sign the loan agreement. Even though the loan is not from a bank, the loan agreement is a legally binding document.

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.

Sunday, February 10, 2019

Red Flags To Avoid When Seeking Arizona Hard Money Lenders

(Selecting potential Arizona Hard Money Lenders can be a challenging process. It is very important to know and avoid certain lenders who raise the following red flags.)

Because Arizona Hard Money Lenders are private individuals or small groups, it can be hard to evaluate them and separate the honest lenders from the scam artists. But this is a critical process that must be carefully completed before requesting a hard money loan. Knowing a few of the most common red flags that could appear during your evaluation process could save you a lot of time and money in the future.

Arizona Hard Money Lenders are in business to make money. And the only way that a legitimate lender can make money is by providing loans. If you are having a hard time getting a private lender to return your calls or respond to your email, then chances are, you want to eliminate this lender from your list. Honest Arizona Hard Money Lenders are eager to respond to and work with new clients. And any lender who is not active in responding and providing information is not trying to run a legitimate business.

Another red flag has to do with communication, but not a complete lack of contact or communication. You might find a lender who is eager to take your call and talk for hours about all that he or she has to offer you. But when you request that information in writing or send a question via email, the only responses come verbally. This is a tactic to avoid putting any promises, fee structure or details in writing so that the lender can overcharge you or simply disappear with your processing fees and possibly your personal identity information. Any reputable lender will be completely transparent and will gladly provide all of the written documentation that you request.

Large Upfront Fees

It is not unusual for lenders to request an appraisal fee up front as that is needed to determine the value of the collateral. But lenders who are requesting large application fees or processing fees for the application could be a scam that will disappear once you pay the fees. As soon as you learn of substantial upfront fees, you should begin to explore references and seek information about previous projects and previous loans which the lender has funded to determine if they are really a legitimate lender or a fee scam artist.

Be Attentive And Realistic

Using a private lender is no different than selecting any other service provider. During the evaluation process, you need to pay attention to the level of service and the time it takes to get a response. Also take note if the lender avoids answering certain questions about the process, the fees or the business in general. These can be signs that at the very least the lender has something to hide. And in the worst cases, the person is not even a legitimate lender and is just trying to scam you out of fees and possibly personal information. Be realistic and only work with the lenders who freely offer information and are willing to provide it to you in writing.

What To Look For In Arizona Hard Money Lenders

(It can be difficult to evaluate Arizona Hard Money Lenders if you are not an experienced borrower. But having a few tips to evaluate potential lenders can make the process less daunting.)

Unfortunately, not all Arizona Hard Money Lenders are working to provide borrowers with a legitimate option to a traditional loan. There are some who will take advantage of a borrower with bad credit or no credit as well as an investor who is in need of fast funding. But using the following four tips can help you to better evaluate potential lenders and find the one who is best able to meet your needs.

One of the first questions that you will want to ask a private lender is about the turnaround time on funding a loan. The last thing that you want to do is be forced to wait for weeks while the lender accesses funds for you. It is sometimes difficult to be sure that private lenders are providing accurate information, so it is always best to request all of the answers to your questions in writing. Email questions so that you have documented responses in the event of any issues as the process moves forward.

After determining that the lender is able to fund in a reasonable amount of time, the cost of the loan is your next concern. Arizona Hard Money Lenders will generally charge an interest rate somewhere between 10% and 15% based on the perceived risk involved in the loan. This means that a good credit score and solid financial history can secure a better interest rate. The amount of your down payment can also have some impact on the interest rate as a larger down payment will create more instant equity in the property.

Be Sure The Lender is Legit

Although Arizona Hard Money Lenders are not governed by the same rules as banks and mortgage companies, they are required to follow numerous regulations. These include their business practices as well as the insurance that they must carry. Be certain that your lender or any potential lenders that you are considering are licensed, bonded and insured for your own protection.

Get References

You should always ask a potential lender for a list of references. If the lender is shy about providing this list then you should reconsider working with him or her. This is a sure sign that the lender has little or no experience or that he has no satisfied clients who are willing to speak to potential borrowers. Either way that is a serious red flag. Even when the lender does provide a list of references, understand that these are the clients who have had the perfect borrowing experience and are possibly real estate investors who bring a lot of repeat business to the lender. Take their information with a grain of salt. And take the time to check out the BBB and other Internet resources to see what borrowers are saying about the lender. This will give you an honest evaluation of the lender and his or her lending process. With all of this information, you can make a well-informed choice about who to use for your private lending needs.

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.

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.