For many Arizona Home Buyers and Real Estate Investors purchasing real estate with traditional mortgage financing isn’t realistic or possible. There are other methods for getting real estate financing, including the use of “Hard Money”

Privately funded temporary financing is referred to as hard money. Hard Money Loans are not intended for permanent financing. The upfront fees and interest rates for hard money loans is very expensive, and they need to be paid off quickly, as soon as the real estate flip is completed. Loan costs for Arizona hard money loans are usually between about twelve and 18%, and these loans also have up front fees from 2.5 and 5 points up front .

Purchasing Arizona investment properties without money down is hard to do, but it is possible if you can prove that the value of the real estate is worth more than what you are borrowing.


When should Arizona hard money loans be used ?

Hard money loans should only be used for short term financing and real estate investing. They usually will be only given if the investment is worth at least 20% more than the amount financed. If the investor plans to keep the investment as a long term investment, the Hard Money financed should only be used as a gap loan, to bridge the gap until traditional financing can be obtained.

At rare times, hard money can be used by homeowners in distress who need to do something to prevent foreclosure. Because hard money brokers generally base the loan on the value of the property, and not on the credit worthiness of the borrower, they will lend to people with poor, or bad credit, if the distressed property has significant equity. However, this will most likely just serve as a temporary solution. Private hard money lenders are known to be ruthless, and will typically foreclose on properties as soon as a payment is missed. For this reason, home owners should be very careful when are in distressed situation.

What should you look for in hard money lenders ?

When choosing a hard money lender you need to consider the time it is going to take to obtain the loan , the cost of obtain the loan, the monthly interest rate, and repayment terms . You should also consider how liquid the loan will be, how long it will take to get the cash when you find a great deal . If the hard money lender takes too long to get financing to you, you’re probably better off getting traditional financing, and will miss out on the opportunity to purchase a deal at a foreclosure auction .