Most people are not sure of what hard money loans are and tend to have wrong assumptions. Most believe that Arizona hard money loans are given out by shady lenders or rather shylocks looking to rake money from their borrowers by imposing ridiculous rates of interest making it virtually impossible to repay the mortgage in time. It is therefore essential that you get more information from an experienced and proficient hard money loan specialist now. In the past, many lenders used borrower’s homes as security for high loans, and this would make it impossible to repay in time. Failure to repay, the lenders would start the foreclosure process.
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This, however, happened in the past and not anymore. If you have not used hard money loans for a while, you could not be aware of the new process. This article will shed more light on Arizona hard money loans. It will give information on the definition when the loans should be used, and the requirements.
Understanding the Purpose of an Arizona Hard Money Loan
For the most part, if you are looking for a loan on a short-term basis, hard money loans are the ideal options. This loan is typically given to borrowers who have real estates which allow them to get fast cash loans. However, it is essential to note that traditional lenders like banks do not provide this funding. The loan is given by investors and is to be paid off around in a year, but extensions can be granted depending on the agreed terms. In these exceptional cases, borrowers can have an extension of over for years to repay the loan. If you take a hard money loan in Arizona, you will pay a specified interest amount monthly. The amount of cash that lenders will offer you depends on the value of the property. One beautiful thing about Arizona hard money lenders is the fact that they care less about your credit score. They are more interested in the value of the property that will cover the loan. This means that a bank can deny you a loan and approved by a hard money lender since banks often do not like working with individuals.
Types of properties you can own when applying for a hard money loan
When dealing with a hard money loan, the type of property you own does not matter. This is because you can get any amount of money you need depending on the value of that property. Also, different borrowers have different types of property to use as collateral. These include homes, commercial properties, spare properties, and so on. Most lenders, however, love dealing with people who use their homes.
Best time to use hard money loans
It is imperative to note that despite their advantages, hard money loans are not helpful in certain situations. If you are looking to buy a home and stand a better chance of being funded by a financial institution, then a hard money loan is not a good option. However, if this is not the case, ideally go for a hard money loan. Below are some of the reasons why you may opt to use Arizona hard money loans:
- Need money, but you have a bad credit score
- Getting funds for construction
- Renovating your home to sell it for cash
- Require money quickly and not ready for the vast bank process
Beneficiaries of a Hard Money Loan
Most investors use these loans since they will get their money back quicker than if they used traditional bank loans. The funding from Arizona hard money lenders typically comes in around a week or less. Bank funding, on the other hand, takes a month or more, and this can be frustrating for most investors. Therefore, an increased opportunity to be approved, and the short term required, many people are drawn to hard money loans than other types. It is even used by real estate investors to compete against other investors.
With hard money loans, the process is much easier compared to other conventional loans or banks. Credits problems like short sales and foreclosures can happen to anyone, and hard money loans are a life-saver. Banks are more interested in income consistency even with a good credit score. Hard money lenders can overlook the consistency factor based on the property value or the will of the borrower to repay.
Points and interest rates for Arizona hard money loans
The rates of interest and points charged by hard money lenders can vary from lender to lender or region to region. For instance, the California rates are lower since the state has many hard money lending firms; hence, high competition forces the lower rates. Also, hard money lenders take more risks than financial institutions. This explains the high-interest rates hard money lenders charge some as high as 10-15%, but this depends on the assessed risks.
Typical value rations for hard money loans
In Arizona, most hard money lenders determine the loan amount to be given based on a ratio calculated around the property’s value. For instance, if the loan is to improve a property, the lender will estimate the costs of furnishing after the project is done. This loan is riskier as the borrower’s capital investment decreases as the lender increases the capital amount invested. As a result, money lenders will charge more interest due to the increased risk. In other instances, lenders will give a higher percentage of the ARV and could even finance the entire rehabilitation. Be wary as this could be a masked way of increasing the interest.
Finding a hard money loan lender
It is not hard to look for a reputable hard money lender in Arizona. With internet access, you can go online and search hard money lenders near you and get the information from their websites, social media, and other online pages. Ensure you go through the reviews left by other satisfied clients to get the best deal. Other lenders can be found on local real estate investor club meeting. Another sure way of finding the perfect lender is by asking around from friends and family members who have used such services before. They will be in a position to point you in the right direction.
However, before making a decision, get more information from our Arizona hard money loans experts and will assist you with the best loan for you.