Many borrowers are very surprised when they learn that the requirements to qualify for Arizona Hard Money Loans are much different than those of traditional loans. Understanding these differences can be very helpful to certain borrowers.
Because Arizona Hard Money Loans are asset-based, meaning the approval is based more on the value of the property being purchases than the borrower’s creditworthiness, credit scores are not a much of a concern as is the case with traditional loans. Rather than the borrower’s credit score is the most important criteria, the actual value of the property is more important. So in most cases, a credit score of about 550 is enough to secure most Arizona hard money loans.
The lender is going to require that the borrower show proof of an income that will allow him or her to make the loan payments for the hard money request. In most cases, this is done by submitting paycheck documentation or other income streams. The lender might also request a few months of bank statements to show that the income has been consistent and to track cash flow for other bills.
If the loan is being used to purchase a fix and flip property, the lender is likely to request information about the borrower’s level of experience in the fix and flip industry or the real estate business. This is to show the lender that the borrower has the knowledge, skill, and understanding needed to complete the renovation project as well as the ability to keep the project on the needed schedule for completion and resale. Some lenders will also as for a formally written exit strategy. This is often a detailed account of a contingency plan in the event that the project is not completed on time or if the property does not sell as quickly as expected.
Because the property being purchased is going to be the collateral for the loan, the lender is going to be very interested in the current condition of the property as well as the potential for the increase in property value. In the case of fix and flips, the demo involved in the early phase of the project can actually drop the property value for a time. The lender always wants to be certain that the condition of the property is not so poor that the demo could make the property almost worthless. Having a property with good potential for value increase is the best way to secure a hard money loan.
Know the Criteria
Private lenders are free to set any criteria that they choose to for borrowers. It is always best to ask each potential lender what his or her criteria are for hard money loans. This can help you to save time and money when you are applying for a loan. This information, along with the interest rate and a complete fee schedule from each lender will allow you to evaluate all of your options and select the lender and the loan that will best suit your needs.
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.