Unlike traditional bank and mortgage company loans, Arizona Hard Money Loan are based on the value of the property being purchased and the potential for profit. Lenders are not scouring the borrower’s credit history and credit report to decide if the person is financially able to make the payments like banks would do to approve a loan application. So even a borrower with less than perfect credit has the opportunity to secure Arizona Hard Money Loan.
In addition to the value of the property, lenders are looking at the borrower to determine the level of experience the person has in real estate investing as well as the proposed project to repair or renovate the property. In the case of a fix and flip, which is a very common investment using hard money, the lender will look at past projects, profit from those projects and the scope of each project to determine the level of risk involved in the proposed real estate deal. Preparation is critical to a smooth construction project and lenders will want to examine a project plan to know that the borrower is prepared to see the project to its completion and to complete the sale to repay the loan.
Asset-based loans are secured by the value of the property being purchased, and for that reason, the lender needs to know that the property is always going to be worth more than the outstanding balance of the loan. Loan to value is a means of determining how much the lender is willing to loan on a given property. In most cases, Arizona Hard Money Loan are offered for between 70% and 80% of the value of the property. The lender will say that the LTV is 80% and that will be the highest offer he or she will extend to the borrower. It is then the borrower’s responsibility to secure the remaining funds to purchase the property.
In addition to knowing that the property is always going to be more valuable than the loan balance, lenders know that a borrower is likely to work more diligently and tirelessly if he or she has some of his or her own money involved in the project. Defaulting on a loan and losing a property is bad, but losing the property and your own cash is far worse. This gives the borrower even more incentive to be successful and it offers the lender more peace of mind.
Often times, lenders will request proof that the borrower has access to the remaining funds to make the purchase prior to funding the hard money loan. This money can be from a personal line of credit, a line of credit on another property or loans from other private individuals or even a cash advance on a credit card. But the important part is showing commitment to getting the project completed on budget and on time to repay the hard money lender and the other lenders.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
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 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.