REIA or MeetUp Meetings: Often hard money lenders will speak at local real estate events. If not, ask fellow members to see if they know any trustworthy lenders.

Real Estate Agent or Traditional Lender: Ask that realtor, or mortgage broker, in your real estate network if they know a hard money lender you could do business with.

Google “Hard Money Lender”: Just be careful, there are some unscrupulous individuals out there. Be sure to ask for references and talk to fellow investors to get their opinion.

Working with Arizona hard money lenders will be somewhat different than going through a traditional bank for financing. Hard money lenders are not regulated similarly to conventional financing institutions. The lack of regulations means the rules of the loan will be different. Borrowers will even have the opportunity to negotiate directly with lenders on the loan terms. Phoenix Hard money lenders will decide what to accept at their discretion, specifically concerning credit scores, debt-to-income ratios, etc. Remember that the essential thing hard money lenders want is a return on investment. Melanie Cohen from Instaya advises to “make sure that the property is a worthy investment and communicate its potential to your lender. Compared to a traditional loan, working with hard money lenders is more about investment potential than your financial standing”.

Given that these are private individuals, every hard money lender is different. As stated above, these lenders come with their own requirements, including the process they need to close the transaction.

To give you a general idea, this is the usual course hard money lending takes:

Find a hard lender near you. Do not let the rejection of a bank loan drive you to desperation. Research and make sure the lender can be trusted. Do they have a legitimate website? Are they in good standing with their own investors? Do they have pending lawsuits over bad loans?

Arrange a meeting with the lender. This is also the time when you can inquire whether they specialize in a kind of investment property or if they have worked with projects previously that mirror yours. Assess the time frame specified for the loan and see if this is something you can work with.

Prepare a contract. Make sure that you are offering a good deal with a sound financial plan.

Inform the lender of your contract price. Most lenders are willing to fund 60 to 70 percent of the property’s ARV. The remaining 30 to 40 percent is up to you. You will increase your chances of getting approved if you already have this at hand.

Get the property appraised. The lender will either send a list of their trusted appraisers or have their own.

Prepare additional documents needed. Some lenders may require that you present other documentation, like W-2s, bank statements, pay stubs, etc.

Wait for lender’s approval. If it is a deal that the lender finds satisfactory, then they will inform you of the amount and terms for payment.

Consult with a lawyer. Make sure that you are legally protected, especially after getting the lender’s counter offer.

Close the loan. Typically, this will be done at a title company or a lawyer’s office. The lender will then put the money into escrow at the title company. The title company would make sure all paperwork is completed and that checks are issued to all parties involved. Additional costs may include any closing fees and property insurances.

More often than not, lenders grant money to properties that will not be in the market for long, that have good selling potential. Make sure your team budgets ample time to complete renovations. There’s no sense in coming up with unrealistic projections. This cannot only set you back financially but possibly burn a possible future relationship with your hard money lender.

Arizona Hard money loans are not the only form of financing with approval requirements that differ from a traditional home loan. Numerous alternatives may help you buy your next property:

Home Equity Loans: If you are trying to finance your second property (or an investment property), consider tapping into your existing equity with a home equity loan. The approval requirements are primarily based on the value of the property and the amount of equity you have built up. These loans are also associated with lower interest rates when compared to hard money loans.

FHA Loans: Federal Housing Administration (FHA) loans are an option for borrowers who do not meet the traditional criteria. FHA loans have lower approval requirements and do not consider past financial challenges (namely bankruptcy) during the application process. Read our guide to FHA loans to learn more.

VA Loans: Loans by the Department of Veterans’ Affairs require no down payment and have much lower approval standards. These loans are only provided to qualified veterans, active duty service members, and their spouses. The interest rates and application requirements are often much more favorable if you do qualify.

Summary

Learning what is a hard money loan for real estate acquisitions has become commonplace in the housing sector. If for nothing else, a hard money loan gives investors an edge over those using traditional financing methods. Not only should hard money borrowers be able to secure capital faster, but sellers will also favor their offers because they are made with cash. That said, if you are looking to fund a deal, you may not want to ignore hard money; it could be the one thing that gets you what you need.

Have you ever bought an investment property with hard money? What was your experience like? Feel free to let us know how things went in the comments below.