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Monday, November 18, 2019

REGULATIONS OF VACATION HOME LOANS

You have finally figured out how to get that lake house you have dreamt of for years. You can rent it out when you are not using it—genius idea! But, hold on because traditional lender rules may not allow that deal to come true.

The first thing you must know is there are different mortgages to finance a vacation home and each of these mortgages have their own set of rules. There are three main mortgages: primary residence loans, second-home loans and non-owner occupied loans.

A primary residence loan is where a borrower will find the lowest mortgage rates. After living in the house for at least one year you are legally free to rent out the home as an airbnb. A second-home loan has the same rates as primary residence loans; however, down payments will be larger. On the average lenders require 20-25%. Finally, non-owner occupied loans, which are also called rental property loans. These loans will run you about .35 percent higher than primary and secondary home rates and your down payment will typically be 30-35%. With a non-owner occupied loan you will be allowed to rent it out and also to use it when it’s not being rented.

When you take a loan for an airbnb, there is a document titled the note. The note will have all the information about the “cans” and “can’ts” of your loan. This will include everything from the loan rate to any additional requirements of the loan. This is where you will find, in a second-home mortgage, that says you can not rent out the home. If you do not follow these laid out rules you will be found in default of the loan.

MAKE SURE YOU TAKE OUT THE RIGHT LOAN FOR AN AIRBNB

Many people are choosing to invest in vacation properties. If the property is near a popular tourist destination it is very possible that the entirety of the mortgage can be paid solely from renting the property out. Airbnb is taking over hotels. Why would people pay the same amount for a hotel room when they can have an entire condo for close to the same price? It’s a brilliant idea to buy a vacation home and have the mortgage paid by tourists. Unfortunately, financing the purchase of vacation real estate can be quite the challenge. Typically, lenders don’t lend large loans on vacation rentals because they are considered investment properties. The problem lies in that banks have no reliable source of data for the vacancy rates on a vacation rental property. Add on that appraisers don’t use short-term rental rates when looking at rental or vacation properties. What that means to a potential buyer is that these properties are undervalued in their potential generation of income. Therefore, banks are not confident on a borrower’s ability to pay the mortgage on said property.

Help with getting a loan for an Airbnb in Arizona

This is where a hard money loan comes into play. These investors know the market is out there and believe a profit can be made. Hard money investors do not base your ability to pay back the loan on your debt-to-ratio or your credit. These loans are based on a borrower’s assets. They are asset based loans. You can find them as low as 7% interest and your investor will work with you closely on loan terms. Remember, where there is a dream, there is a way. See a hard money investor to explore the options that are available to you.

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

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: 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.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Sunday, November 17, 2019

WHY 100% LTV Financing in Arizona IS HARD TO GET

100% LTV Financing in Arizona is not impossible to get, but it can be challenging.

Hard money lenders are typically disinclined to approve 100% financing on a deal. It is unsettling, to most lenders, when a borrower requires 100% financing. There are 3 main reasons that most lenders won’t approve 100% financing.

1. The borrower has no experience in real estate or hard money: Not having any experience in hard money loans or real estate increases the chances that the borrower will make a mistake and this will cause both the lender and the borrower to lose both time and money.

2. The borrower isn’t financially solid: When a borrower asks for 100% financing it casts doubt on their financial situation. This can cause the lender concern about the loan being repaid. Typically, lenders feel that a borrower who isn’t risking any of their own money has very little skin in the game; and that is not a risk most lenders want to take.

3. The borrower won’t assume risk on the deal: When a borrower requests 100% LTV Financing in Arizona and therefore has no equity into an investment, it makes sense that lenders feel it would be easy for the borrower to walk away from the property, leaving the lender fully responsible for any potential losses.

100% financing is rare in commercial real estate deals. You will see it more in residential investing; and even more commonly you will see it in fix-and-flip deals. A lender is more likely to finance 100% of the project if it is a short-term deal with a clear predetermined strategy. Most lenders that finance an entire purchase will only do so for experienced real estate investors. A borrower that is new to the game will have a much more difficult time finding complete financing.

INEXPERIENCED BORROWERS NEED SKIN IN THE GAME

When it comes to investments you will always take it more seriously if you have some skin in the game. It’s a little like being a kid; remember, wanting new shoes, or a video game, or a remote-control plane? You would ask your mom or dad and they would say, “yes.” More than likely once the excitement settled down you would toss it wherever the “toys of yesterday” lived. But, remember saving your money and buying that same toy? I’m willing to bet you took better care of it. It is human nature to take care of things better if you have invested in them. If you have no money invested, it will always be easier to walk away.

What is cross collateral and how can it help you get 100% financing?

Cross Collateral is where the borrower allows the loan to be secured by equity in an additional property. Hard money loans are always backed by real estate. In cross collateral there is more than one property and at least one of the properties are free and clear—meaning the owner owes nothing on the property.

Let’s say you find a property you want to purchase for $200,000. You want to purchase this price, but don’t want to put money down on it. You also have a property that is appraised at $175,000 and is paid off. You will find lenders that will give you the $200,000 because the property you own free and clear plus the new property are enough collateral to pay back the loan if you default on the terms of the loan. That is cross collateral—and that is what you will most likely need if you are an inexperienced investor looking for 100% financing.

Saturday, November 16, 2019

THINGS TO CONSIDER BEFORE TAKING OUT A RENTAL PROPERTY LOAN

Purchasing n Arizona rental property is a smart way to add passive income to your portfolio. But, how do you finance it?

If you are a home owner you may believe that purchasing a rental home will be as simple as getting a mortgage for your home. Unfortunately, it’s not always that easy. Walking away from your home, in times of a financial hardship, would be difficult for most. However, lenders are aware that in those same financial troubles, walking away from an Arizona investment property would be much easier. For this reason, it is more difficult to secure a loan on an Arizona rental property.

WHAT YOU NEED TO KNOW ABOUT FINANCING A ARIZONA RENTAL PROPERTY

Borrowers are able to get FHA loans with credit as low as 500 when buying for their principal residence. However, when purchasing a rental property in Arizona be prepared to have a minimum of 620; and to get lower interest rates a borrower needs to be closer to 660. You will also face higher interest rates on a rental property; usually, rental property in Arizona loans will come in at about 1 percent to 1.5 higher than an owner-occupied property.

A large down payment will usually be necessary on a rental property in Arizona. Most lenders require at least 20% down. All conventional loans use the Freddie Mac or Fannie Mae seller guidelines. These seller guidelines are what establish underwriting guidelines; however, loan services will usually add on their own overlays.

Higher cash reserves are liquid assets; they can be checking and savings accounts, retirement account assets and investments in mutual funds to name a few. Cash reserves are assets that can become available for your mortgage in cases of financial hardship. Lenders will want to see a potential buyer have higher cash reserves than that of a principal residence.

How to determine which type of lender is best for you will depend on many factors. Below are options.

1. Community Banks/ Credit Unions: A smaller bank will typically be more willing to work with you than a larger broker. They will keep the loan in-house versus sell it off to an investor. However, they may only approve you for the geographic area they are located and this can limit you.

2. Conventional Bank Loan: These are the loans that must conform to strict guidelines established by Freddie Mac and Fannie Mae. A higher down payment will be required. However, equity will build faster. That large down payment may make it difficult for a first time investor. Conventional bank loans may be a better option for experienced investors who have the money to put down.

3. Hard Money Loans: This is a loan that is issued by a private investor or investment company. Hard money lenders are less concerned in a borrowers credit and more interested in their assets. This type of loan will always be backed by property. Approval times are much faster and some lenders will lend 100 percent of the purchase price.

Rental properties in Arizona have always been looked at as a simple way to achieve wealth. It is important that the borrower considers all the risks of being a landlord. Take your time and find the right lender that can make this dream a reality.

Friday, November 15, 2019

ARIZONA PRIVATE MONEY LENDERS ARE THERE WHEN YOU NEED THEM

Are you eager to buy an investment property, but your credit is less than perfect? Have you been turned down by traditional lenders?

Arizona Private Money Lenders, sometimes called hard money lenders, are non-institutional lenders that issue short-term loans. Typically, these loans are for the purchase of an investment property; however, they may also be used for fix-and-flips, rehab projects and quick funding.

Arizona Private Money Lenders are less bothered with a borrower’s credit and more concerned with their hard assets: which is real estate, cash or land. A hard asset will show up on financial statements. This is opposite of a soft asset which can include: equipment, furniture, software and any other assets with a low intrinsic open market resale value. Usually, a lender wants to see a FICO score of at least 550; however, that is not always the case. The type of private money lender you choose will determine the credit score you need.

DIFFERENT TYPES OF MONEY LENDERS, LOAN QUALIFICATIONS, LOAN TERMS AND APPROVAL TIME

There are three main types of Arizona Private Money Lenders:

1) Primary circle: These are your family and close friends.

2) Secondary circle: This consists of personal friends, colleagues and professional acquaintances.

3) Third-party circle: This includes accredited investors and hard money lenders.

Borrowing money from your primary and secondary circle may be easier to obtain, but in the long run can get uncomfortable and relationships can become strained. Hard money lenders belong to your third-party circle, which is the most distant in terms of relationships. They have proven to be the best private lenders due to their reliability, professionalism, across the board interest rates, fees and loan terms. You will know exactly what you are getting into before accepting the loan. The terms don’t change.

Private money loans have much shorter loan terms than traditional loans. They have terms anywhere from a month to 5 years. Hard money lender terms are typically between 1 and 3 years; with most loan terms closer to one year. Pre-qualification can occur in as little as 10 minutes and funding typically is dispersed within two weeks.

When meeting with a hard money lender you will need to bring the last three months of your bank statements, a credit score of 550, the property location and the purchase price. If you are seeking a hard money rehab loan, lenders will also require contract bids, a renovation scope of work and a portfolio of your experience that includes prior projects.

Is a private money lender right for you?

Are you looking to purchase, renovate and sell your property within a year or less? Do you need quick financing to compete with cash only buyers? Are you looking to purchase and renovate a property before you refinance with a conventional mortgage? Or, have you been turned down for a traditional loan? If any of these scenarios describe you, a private money lender be may your answer!

Thursday, November 14, 2019

DO YOU WISH YOU COULD BUY AN INVESTMENT PROPERTY BUT YOUR BANK TURNED YOU DOWN?

You have searched high and low for that perfect Arizona investment property and finally you’ve found it! You get to your bank only to find out the property’s condition is not up to par with your bank’s mortgage conditions and your credit is less than attractive—no loan for you. But, there is a solution—a hard money loan.

Just like all loans, a hard money loan is money borrowed by a lender. The borrower receives the money and, in turn, the lender receives monthly interest on the loan until final payment has been issued. Where traditional loans are based off the borrower’s credit, hard money loans are based off the asset being purchased. If the borrower defaults on the loan, the hard money lender will foreclose on the property.

BENEFITS OF A HARD MONEY LOAN

There are a plethora of reasons to obtain a hard money loan; however, the quick approval and release of funds along with the relationships investors can make seem to be the most popular.

There are fewer hoops to jump through when you are working with a hard money lender. You will work with an individual lender versus a group of lenders at a bank. There is less paperwork and a shorter waiting period because the lender is more concerned with the Arizona investment property, not in your debt and credit scores. The property you are purchasing will be backing the loan. Working with a hard money lender you could easily have your funds available in as little as two days; unlike a traditional mortgage which could take months.

You can build a relationship with your investor. If you show that you are reliable; you pay your debt back on time or early, your investor will want to work with you again. Once your lender trusts you they may be willing to do things such as reduce the origination fee, get your funds to you faster or loan you greater amounts. Building trust with your lender will form a priceless business relationship.

You can get a hard money loan for virtually any type of property: from single family residential to commercial and industrial properties. Typically, borrowers use hard money lenders for fix and flips or to rehab a property. Some hard money lenders will not fund an owner-occupied residential property because of the extra regulations. However, there are plenty that will.

Is a hard money loan the right move for you?

Hard money loans are most ideal for:

* Fix and flips

* Construction loans

* Rehab properties

* A borrower who doesn’t have enough cash or access to private financing

* A borrower with bad credit

* Quick financing for an investor who is competing with a cash only investor

Hard money loans aren’t for every investor in every situation, but of you are just starting out they are an excellent choice. These loans allow you to purchase real estate with little, or none, of your own money.

Wednesday, November 13, 2019

HOW TO QUALIFY FOR A BUSINESS LOAN REGARDLESS OF YOUR CREDIT

You’re tired of working for “the man.” You want to be your own boss. That comes with start up money. You’re going to need a business loan.

The hardest part of starting your own business is finding the financing. It can be problematic, but it is not impossible. There are numerous sources when looking for a business loan. The more prepared you are, the better chance you will find your funding.

HOW TO GET AN ARIZONA BUSINESS LOAN

Creating and building a business requires two things: a great idea and money. Business lenders can have incredibly strict standards. So, the more you know about what these lenders will require the easier it will be to get approved.

1. Get a business plan: There are few lenders that will fund you without a business plan. A business plan will include a written description of the future of your business. It is a detailed story of what you plan to do and step by step instructions on how you plan on doing it. This will include: your strategy, your products and services, your marketing plan, your background and your personnel’s background, and your financing needs.

2. Decide which type of loan is best for you: It can be difficult to get a business loan if you are just starting out. Often small business lenders want you to be in business for a certain amount of time and require a minimal annual revenue. If you are just starting out a personal loan or small business credit card may be something you look into. These are unsecured, so you will not be required to put up any collateral like you are with a business loan.

3. Gather documents: Business lenders will want to know if your business is a good risk before funding you. You will need to pull out all your financial statements; this will include the last three years of your bank statements, personal credit report and business and personal tax returns.

4. Check your credit: You will have more success if you have good personal credit. Your FICO score will range from 300-850. The better your credit, the lower your interest rate. The majority of borrowers range from 670-739. However, it is still possible to get a loan with poor credit.

Can you get a Arizona business loan with poor credit?

Yes, it is still possible to get a financing for your small business with poor credit. One way to do this is through a hard money business loan. These loans are meant for business owners who don’t qualify for traditional business loans. A hard money Arizona business loan is a loan that is backed by the business’s commercial real estate. A hard money loan is an asset based loan. In essence, you will be using your business’s commercial real estate as collateral for the loan. In case of default by the borrower, the property is used as protection. This is fantastic news for people with bad credit; because this loan is not based on the borrower’s FICO score. It is determined, almost completely, by the collateral you can offer to the lender. Hard money business loans are calculated by a loan-to-value ratio. The loan-to-value ratio is a percentage of the property's value. Typically, lenders will lend 70-75% of the value of the property used as collateral. These are non-traditional loans and are individuals or lending organizations. Hard money business loans are easy to apply for, easy to qualify for and borrowers will receive funds quickly.

No matter what financial situation you find yourself in, you will find funding for your business. If you are a veteran business owner (or a new business owner), don’t qualify with traditional banks’ strict standards, or need your funds available quickly— there is a lender for you.