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Purchase Rentals In Phoenix, AZ With No Money Down Using Hard Money Refinancing

How To Purchase Rentals With No Money Down Hard Money Loans

Real estate is often accomplished by investors through a short term loan. A short term loan is the solution to purchasing rental properties and also fix and flip homes. It is also used in purchasing homes as rental properties until a long term financing can be found.

The use of hard money will more than likely be expensive, even more than what traditional financing would be, and it is best to have some short term financing to use. However, many investors find a hard loan as a terrific option, yet, this is going to cover short term financing options as well. You can also use a conventional refinance loan for purchasing rental properties without having to have the money to put anything down.

Hard money loans, what are they?

A hard money loan is something that helps an investor to purchase rental properties for a short term, usually six months or less. They will have different terms than the traditional bank loans do. Those who lend out hard money loans are going to have a much higher interest rate, with an interest rate of twelve to sixteen percent, plus points for the money they loan you. For those who do not understand what points are, it is a percentage of the amount of the original loan and accumulates other charges and can accumulate as much as four points rather quickly.

Is there any certain reasons that an investor would use hard money to purchase property?

Investor will choose to go through an investment to purchase a rental property with a hard money loan because the lender may be willing to cover the entire amount of the loan plus what it is going to cost them for the repairs, referred to as the after repair value (ARV). These lenders are willing to loan the investor as much as sixty-five to seventy percent of the ARV, you need to remember that that is not the purchase price, it is the price the house will be worth after it has been flipped.

So, how does the lender make their money off of a hard money deal?

For instance, an investor purchases a home for $60,000 and the after repair value is $130,000, the lender is going to loan the investor up to seventy percent of the after repair value of the property. This means that the lender is going to loan the investor up to $91,000 on the property based on the after repair value. Estimates of all repairs have to have bids and receipts and the lender will cover those costs as part of the hard money loan.

The lender is going to be paying twenty-five percent of the repairs at the closing and the rest of the payments will then be in twenty-five percent increments as each repair is finished. The loan principle, interest, and points will be paid in one lump sum after the house has been sold. The lender isn’t going to charge any interest until after the house is sold, however, the lender in this case is going to charge a fifteen percent interest along with the four points, which they are willing to reduce the points paid if you do some deals with them.

When dealing with a hard money lender the cost to you can add up quickly. The interest alone for this deal is going to cost you $6m825 plus the points is already $3,640 for a six month loan. You may find a hard money lender that is will to lower the charges on interest and points, of course these are going to want you to share the profits evenly with them.

Personally, I never use a hard money loan, but the options are there for those who have no other options.

How do you locate hard money lenders?

Hard money lenders are out there, many of them will only do business in certain states, while others may do business across the nation. Begin by searching on the internet for a hard money lender in the same state you live in, using any of the search engines. Here is a few hard money lenders in case you would like to talk with more than one: Located in Phoenix, AZ is the Brad Loans, and there are the Private Money VS. Hard Money for Investment Properties.

What is Private Money VS. Hard Money for Invest properties?

Private money is when you are getting the money from someone, not from a mortgage co. Or a bank, or any other type of lender but from a person. Sometimes a regular person will loan the money needed for real estate property, especially right now, with interest rates as low as they are. Right now the average interest rate on a CD is under one percent. No one can keep up with the ongoing inflation with the interest so low. While the wealthy is now looking for higher yield investments while they are still secure others are buying up properties. By loaning out to investors could be the perfect thing for them at this time, increasing their investment returns and helping investors out, this is called Private Money Loans.

How would you go about locating Private Money investors?

The hardest issue with private money is locating someone that will loan you the money. If you go online you can find many websites that say that are private lenders and that you can borrow money for a fee. From personal experience, this is not the way to go about it as you don’t never know if they are just going to take your money and give you the name of hard money lender or what. Private money lenders are more cautious than that and they only want to do business with people they know they can trust.

The best private money loans comes from someone you know and can trust. For instance, My private money loans have been coming from my sister, she uses her profit returns towards the increase of her son’s college fund. And she will lend me the money for an eight percent rate which is reasonable, without any points added in there. She knows that I know what I am doing and that I am going to be honest with her. This is a lot cheaper than financing with hard money.

Can I purchase rental property with hard money without having any money to put down?

You can refinance a hard money loan if you used a hard money loan to also finance any repairs, using the Fannie guidelines, of course it has to be with a seasoning period. There is not cash out refinance allowed it you do not have a seasoning period. This gives the home a higher loan amount than its original cost since the repairs have also been financed. It means that you will be able to get the long term loan to take the place of a hard money loan and don’t have to wait around as you would if it was a hard money loan.

For instance, you purchase a rental property for $100,000 using a hard money loan of one-hundred percent of the purchase price with another $35,000 financed for repairs, making it a total of $135,000 in loans then you refinance after the home has been repaired using a Fannie loan making the loan amount go up to seventy-five percent of the new appraised value. The if the new value is appraised at $185,000 the amount that you could refinance would be $135,000 but according to the Fannie guidelines you cannot cash out a refinance. However, the original amount loaned to you by the hard money lender could be refinanced.

Going this route tends to be more expensive because it has a higher interest rate, then there are the added points, and the costs of the refinancing with Fannie Mae, but keeping in mind that you have just purchased a long term rent property, repaired it, and had almost no out of pocket expenses.

The use of traditional banking for financing short term loan with an investment property:

Investors can find banks that are willing to give them a short term loan, although they can be hard to locate and usually the investor will already have a good standing with the bank. Our short term loans are done through a portfolio lender to finance our short term investments. The portfolio lender will have an interest rate of about 5.25 percent, with 1.5 percent on the loan. This means we can get up to a seventy-five percent loan on the original value of the purchase price, but we can complete the loan process in a couple of weeks. There were times in the past that a bank would finance these loans at a hundred percent of the value and the funds would be ready on the same day, but, not any longer.

Lines of credit are offer by traditional banks, however, they are not referred to as short term loans. Those banks will usually want something such as real estate or other value property for collateral before giving anyone a line of credit. So, if you have a home and you have equity in it you should be able to get a line of credit. The bank I deal with charges a five percent interest rate and allow up to ninety percent towards the value of my residence, and I can get up to eighty percent on investment properties.

Give us a call today if you are interested in hard money loans for fix and flip, finishing construction, refinancing your mortgage, buying land, or need loans for other investment opportunities but have bad or no credit. Give Brad Loans a call today at (602) 999-9499.

Hard Money Lender Interest Rates 2015 – Brad Loans

Interest rates on hard money loans are much higher than traditional bank financed loans. The first reason why conventional residential or commercial property loans because there is a higher risk involved and shorter duration of financing. Interest rates are also dependent on how the real estate market is doing and the amount of hard money credit available.

Another factor is that most borrowers who use hard money need their loans quickly to purchase property at a profitable discount but their lack of credit requirements or debt make it almost impossible to get conventional Bank financed loans.

View the info-graphic and information below to find out the common interest rates of hard money lenders, how location and condition of your property effects points/interest rates and other loan fees associated with hard money lending.

Contents:

  • Infographic
  • Hard Money Interest Rates
  • Hard Money Points
  • Loan Fees
  • Loan Terms & Amounts
  • Interest Considerations
  • Points & Fees Consideration
  • Conclusion

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Interest Rates On Hard Money?

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Hard money lender’s interest rates depend on the lender. Common hard money interest rates can be as low as 8% interest all the way up to 21% interest with the average hard money interest rate falling in at 14%, and terms can last for 6 months to a few years. Some lending companies will defer your interest payments, being that most lenders don’t want interest payments during the rehab phase.

Default Interest Rates On Hard Money

When borrower’s default on hard money loans they might be charged a higher “Default Rate”. Default rates are controlled by law and have a cap, defaulting on a hard money loan could leave you stuck paying extremely high percentages upwards of 25%–29%. Some private money lenders will collect a pre-payment penalty and some offer loans with no pre-payment penalties.

Credit Scores Effect On Interest Rates

Credit scores of the borrower weigh heavily on interest rates, especially with hard money lenders. The borrower’s experience and ownership of property might also have an effect on the given interest rate by the lender.

Hard Money Points

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Not only will there be interest but hard money lenders also charge loan fees on your hard money loan. Typically, hard money lenders will charge you 2 – 10 points, or 2 – 10% of the total amount of the loan, this is referred to as your loan fee. It pretty common for a commercial hard money loans to start at four points, and go as high as 10 full points. 1 point is equal to 1% of the mortgage loan. Therefore, charging one point on $100,000 loan = $1,000 in loan fees. If you’re getting charged the 10 points, you are going to need to come up with $10,000 for the loan fee.

Loan Fees Associated

For investors that are used to traditional bank loans only having 1% or lower loan fees, this higher percentage can be a “shocker”. Usually this loan fee is set in stone and isn’t effected by experience, credit or the property’s characteristics.

Another factor that should be taken into consideration is the amount of time it takes for the lender to fund the loan. If you are new to their company it might take a little longer than someone else that has already had a loan funded previously. Taking this into account, it’s a smart decision to find a hard money lender that you can build a rapport with for future lending purposes. You want to be able to get your loan funded as fast as possible when trying to take advantages of great investment properties.

Loan Terms & ARV (After Repair Value) Amounts 

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You want to find a hard money lender with terms that suit your needs. Here are the basic terms hard money lenders offer. Most lenders will only loan you 70% ARV (After Repair Value) of your home. The means that the lender is able to loan you 70% of what your repaired home is worth. For example: Let’s say you have a home worth $50,000 in its existing condition and its needs $10,000 worth of repairs, so after repairs, the new market value is worth $100,000. In this case the hard money lender would only be able to loan you $70,000 dollars.

**Important: All borrowers of hard money should use a real estate attorney to make sure your property is not sold or given away by you going into default or having late payments. Most of these procedures could be stopped by a credible real estate attorney and would require a court judgment.

How The Location & Condition Of Your Property Effects Loan Points & Interest Rates

Locations Effect On Points

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The location of the property your buying has an effect on the amount of points you will be charged for loan fees. A great location will keep you in the 2-6 points range, an average location will cost you 3-8 point and a bad or remote location will cost you 5-12 points.

Location’s Effect On Interest Rates

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The location of the property your buying also has an effect on the interest rate you will be charged for loan fees. A great location will keep you in the 9-12% interest range, an average location will cost you 10-13% interest and a bad or remote location will cost you 11-14% interest on top of your financed loan amount.

Condition Of Property’s Effect On Points

Depending on the condition of your property, you may have to pay additional loan fees. A property in bad condition will cost you an additional 1 to 3 points. A property in average condition won’t cost you any additional but a property in great condition could actually save you 1 to 2 points off of your loan fee.


Condition Of The Property’s Effect On Interest Rates


Depending on the condition
of your property, you may have to pay additional loan fees. A property in bad condition will cost you an additional 1 to 3% interest. A property in average condition won’t cost you any additional but a property in great condition could actually save you .5 to 1% off of your interest rate.


Credit Scores Impact On Interest Rates & Points On Hard Money Loans


Credit’s Effect On Points


Credit scores impact
the amount of points you will be charged in additional loan fees. Bad credit will raise your loan 1 to 3 points. Average credit will not affect your loan and great credit could possibly get you a discount of .5 to 1 point.


Credit’s Effect On Interest Rates


Credit scores also impact
the amount of additional interest you will be charged on top of your loan fees. Bad credit will raise your rate 1 to 3%. Average credit will not affect your loan and great credit may get you a discount of .5 to 1%.


Conclusion:

It’s safe to say that if you are looking for a hard money loan, make sure that you have good credit, your property is in a good location/condition and that you are able to make payments on time to avoid the costly fees associated with hard money lending/financing.

 

Loan Programs, Rates & Fees We Offer in Phoenix, AZ: No Pre-Payment Penalty

 

OWNER OCC OR INVESTOR 20-30 YEAR FULLY AMORTIZED 70% LTV

  • 11.99% – cost: greater of $3,000 or 6 points + $1,920 eMortgage fees
  • 13.99% – cost: greater of $2,000 or 4 points + $1,920 eMortgage fees
  • No pre-payment penalty
  • Purchase or Refinance

OWNER OCC ONLY 20-30 YEAR FULLY AMORTIZED 80% LTV

  • 12.99% – cost: greater of $3,000 or 6 points + $1,920 eMortgage fees
  • 14.99% – cost: greater of $2,000 or 4 points + $1,920 eMortgage fees
  • No pre-payment penalty
  • Purchase or Refinance

OWNER OCC ONLY RE-FINANCE 20-30 YEAR FULLY AMORTIZED 65% LTV

  • 14.99% – cost: (NO Points!) $1,920 eMortgage fees
  • No pre-payment penalty
  • Owner Occupied Refinance only
  • Interest Rate Buy Down Fee: 2% of loan amount for 1% of reduction in interest rate

FIX & FLIP INVESTOR ONLY ONE YEAR 70% LTV

Interest Only

  • 15.99%
  • 0 points
  • $1,920 eMortgage fees
  • 4 month interest minimum
  • No pre-payment penalty
  • Purchase or Refinance

INVESTOR ONLY 20-30 YEAR AMORTIZATION 70% LTV

  • 11.99% – cost: greater of $3,000 or 6 points + $1,920 eMortgage fees
  • 13.99% – cost: greater of $2,000 or 4 points + $1,920 eMortgage fees
  • Refinance or Purchase
  • No pre-payment penalty
  • Purchase or Refinance

View all of our Loan Programs

HOW TO FIX YOUR CREDIT SCORE GUIDE 2017

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Looking for a mortgage, but having trouble due to your credit score?

 

Here are some things you can do to get your credit score headed in the upward direction so you can secure the loan you need to live in a home that is desirable for you and your family. Your credit score is viewed by lenders as a direct indication of your willingness and ability to pay back off loans and debt. Another way to look at it is the level of probability that you end up defaulting on the in the first 90 days. It may help you to view your credit score like more of a grade you would receive in school instead of an arbitrary number associated with you. If you have high grades you advance to better classes and receive preferred placement in the academic world and it’s no different in the financial realm. If you grade out high you will advance to better neighborhoods and receive preferred consideration when you make offers on properties or vie for loans, etc.  Keeping tabs on your score as you would you GPA will majorly increase the amount of attention and effort you give to improving your score (grade) and your overall life situation. If you are constantly aware of you credit standing, you will be less likely to make moves that could be potentially harmful to your credit because you eliminate the ‘out of site, out of mind’ factor that has been the downfall of many. The difference between your GPA (grade point average) and your credit score is the fact that you never graduate with credit and you always need to keep your score as high as possible. It’s a lifetime of performing your due diligence to get ahead.

If you fail in school you are given a chance to redeem yourself, whether you are re-taking a test or doing an entire grade over. Credit is the same way. You can always take action to raise your credit score, the amount of work and time it will take to reach redemption depends on how deep of a hole you have dug yourself into. The best place to start rebuilding your score is to look at any outstanding debts and start the process of getting them taken care of as soon as possible. You will see a significant boost to your score after amending any outstanding debts.

After attending to your outstanding debts you need to make sure that you NEVER fall back into the old habits, practices and mind sets that got you into the debt you just eliminated. That cannot be stressed enough; fixing your credit score is more than just a specified mission to improve one area of your life. In effect, improving your credit score comes along with making changes to your overall lifestyle. Approaching this as a wholesome change that will be permanent will put you on the path to reaching the state of mind where the changes you are making become second nature instead of necessitating conscious attention like they will initially.  Make your payments on time, or better yet, early WITHOUT EXCEPTION. This will assure your consistency will always be reflected on your credit report and your score will continually increase. This goes for any payment, small or large, and should become your new status quo for the long haul.

Be sure to not try to do too much at one time in order to remedy your credit score. Just like in school, it will be much easier to attain high scores and be efficient in your studies if you take on a course load that agrees with your lifestyle and schedule. If you take on too many classes during one term, your scores are going to suffer across the board because your attention is being exponentially divided and partitioned. The same thing goes for your credit score. If you try to take on too many remediation steps at once, you will ultimately fall short of your goals or significantly delay yourself from arriving at your desired destination.  Focusing on a few areas at a time until they suit the credit situation you are trying to create for yourself. Doing this ensures you will give full focus to the areas you have chosen to for your current efforts in raising your credit score. Seeing each area through to a satisfactory level will leave you looking at a very complete picture once you have concluded your efforts to rebuild your credit. Think of it like building a structure…..you can’t focus on the roof until the foundation and walls are planned for and built. It would make no sense to build your roof before the rest of the house is done. Start your work at the foundation of your credit score. You will build a sturdy, beautiful and practical structure in the end.

Another tactic that could be effective is disputing your credit score as you would a grade that you disagree with or feel you do not deserve. Just like when you used to complain to your teacher about your grade, you can also take up direct dispute with your credit score. The difference is that with your credit score it will take about 3-5 years for a negative mark to fall off your credit report. If you keep up positive credit practices your entire report should be clear within five years and you should be living with a shiny inflated credit score that will open up brand new possibilities for you and your family!

Are you refinancing mortgage with bad credit or are you in need of a no credit check, hard money loan for fix and flip, real estate, business loans, short sales or other endeavors with quick turnover in Phoenix or Scottsdale, AZ? Look no further than Brad Loans, the most trustworthy direct hard money lender and private money lender in Arizona! Brad loans is the best hard money lender in Arizona with the ability to fund residential & commercial hard money loans sometimes within a couple days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

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