If you are in need for fast cash for real estate needs, waiting for a mortgage might not be a feasible choice. Traditional bank loans and lenders have a huge process that requires the applicant to complete extensive paperwork, and the actual verification can take considerable time. Banks and lenders often check every single aspect in detail, and they are more interested in the income and repayment capability of the applicant. However, for applicants who don’t have a solid score, traditional lenders are not the right choice, and that’s where a hard money loan can fit in. There are many hard money lenders in Arizona, who are simply concerned about the value of the property and nothing else, and here’s a quick overview of the process.
How does it work?
In simple words, hard money loans are secured by the property, which serves as the collateral and not credit. Mostly, the lenders are companies or private individuals who work with real estate investors and property flippers, who want to buy, renovate and sell a home quick. The term of a hard money loan is typically a year to five years. The lenders will decide if they want to shell the loan, depending on the price of the property, and there is enough room for discussion. Requirements for hard money loans vary from lender to lender, especially when it comes to credit scores and LTV ratios. In case, the borrower cannot repay the loan, the lender will sell off the collateral and make the money.
Things to understand
In most cases, the term for a hard money loan is around a year or two. You can go for an extensive period of five years, but keep in mind that the loans have a high interest rate, so it is wise to repay the money as soon as possible. Often, borrowers pay as much as 15% in APR for hard money loans. If you are not a property flipper and simply need a loan to buy a home that matches your dreams by selling the current one, this is the lending option to consider. This is a short-term means of financing, so you have to compare the lending choices differently, unlike a mortgage.
Talk to the lender directly and discuss all the aspects, terms and conditions in detail before signing the papers on the dotted line. Always evaluate your real estate goals before applying.