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8 Reasons You May Need a Hard Money Loan

Most people are familiar with traditional loans for their business, but there are other options that can actually be more beneficial, such as hard money loans. There are many reasons you may want to look at hard money lenders in Arizona to provide you with the funding you need for your business purposes. In many cases, it can be difficult for those interested in investing in businesses to qualify for loans through banks and other traditional lenders because of the strict federal regulations. Even individuals who have a solid business plan and great credit history can be rejected through traditional methods. While not everyone is a good candidate for hard money lending, there are certain situations that benefit from these loans.

Reasons for Hard Money Loans

You should seek hard money lenders in Arizona if you match one of the following:

  • You need funds more quickly and have the escrow to back it up.
  • You want to avoid the red tape experienced with traditional loans.
  • You’ve gone through foreclosure or a short sale that has harmed your credit history.
  • You have declared bankruptcy or suffered another dent in your credit.
  • You are either self-employed or don’t have a stable job history.
  • You already own a number of investment properties.
  • You don’t have the assets and funds to qualify for traditional bank loans that require collateral.
  • You are the owner or representative of a non-profit organization, LLC, corporation or other entity that is searching for property.

Who Can Benefit

Most people who contact hard money lenders in Arizona do so because they need a short-term financing solution they can get more quickly than traditional loans. Private lenders will often approve a loan in as little as a week or two. than the weeks or months traditional loans can take. However, it’s important to realize the underwriting process is quite different, especially considering private hard money lenders don’t have to follow the same regulations set forth by the federal government. While you can expect an easier approval process, even if your credit is less than stellar, this doesn’t mean they will lend to just anyone. They may look at the credit score, but they will also consider a person’s character, their ability to pay back the loan in general and the value of the property. They will be able to structure a loan to best suit the needs of the individual, rather than following the regulations banks and other traditional lenders must follow.

If you’re in need of money to fund a business venture and don’t have a lot of time to spare, seeking assistance from hard money lenders in Arizona can be the ideal option.

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9 Commonly Asked Questions About Hard Money Loans

Not everyone is as familiar with hard money loans in Arizona as they are with traditional lending. However, these private loans can provide a benefit over other methods of lending. Before you explore this option for your business ventures, it can be beneficial to understand the answers to these common questions.

What Makes Hard Money Loans Different?

Hard money loans utilize the value of the property itself as the only collateral. This means the buyer’s assets and credit history have little to no bearing on their ability to get the financing they need. In addition, these loans come from private lenders who can set their own requirements.

How Do Interest Rates Vary?

In general, the interest charged on hard money loans is often higher than traditional loans because they are meant to be a short-term solution. However, underwriting and other costs are typically lower. These loans are sometimes used as interest-only loans with the principal due at the end or may work more like traditional loans with principal and interest factored into the payments.

How Does the Application Process Work?

Applying for hard money loans requires submitting a request to the investor themselves, rather than a banker who doesn’t have the final say. This can give you leverage for negotiations.

What Loan to Value Ratios Affect the Loan?

For the most part, loan to value ratios for hard money loans in Arizona fall between 50 and 65 percent. This rate can be based on the actual purchase price of the property or the prospective value of the property after repairs and improvements are made, whichever is higher. Banks typically use the lower of the two numbers for traditional lending.

How Long Do These Loans Last?

Hard money loans are designed to be used for shorter term solutions than traditional loans. Most of these loans last as little as six months but can be used up to two years when needed.

How Much Do They Cost?

One of the biggest concerns is cost. Buyers are typically required to pay for any underwriting services, including third-party appraisals and environmental reports, among others. However, it’s important to understand how much these fees should be to avoid lenders who are only looking to scam business owners.

Does Borrower Credit Matter?

If you’ve ever obtained a traditional bank loan, you know how important your credit is to obtaining a low interest rate and the funding your need for your business ventures. With hard money loans in Arizona, your credit will have little to no bearing on whether you will qualify for the loan. Instead, the loan will be based more on your character and the value of the property.

Do You Need Money Down?

In most cases, you will need to put some money down to mitigate the risk the lender is taking on. It also ensures buyers are more invested in the property and are less likely to just walk away and not pay the loan back.

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