Discover Top Hard Money Lenders in Phoenix
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Kelsey Morrison Former HomeLight EditorClose
Kelsey Morrison Former HomeLight EditorKelsey Morrison worked as an editor for HomeLight's Resource Centers. She has seven years of editorial experience in the real estate and lifestyle spaces. She previously worked as a commerce editor for World of Good Brands (eHow.com and Cuteness.com) and as an associate editor for Livabl.com. Kelsey holds a bachelor’s degree in Journalism from Concordia University in Montreal, Quebec, and lives in a small mountain town in Southern California.
Are you looking to kickstart your real estate investment in Phoenix with a hard money loan? Whether your goal is to flip a bungalow in the Roosevelt Historic District or purchase a rental property in Arcadia, hard money lenders in Phoenix provide the quick funding and flexible terms you need. These loans serve as an alternative to traditional financing — especially useful for projects requiring fast turnaround times or for those with less-than-perfect credit.
For homeowners needing to bridge the gap between purchasing a new home and selling their current one, this article provides valuable alternatives to leverage your home’s equity. Ahead, we’ll cover the basics of hard money lending in Phoenix, helping you decide if this financial strategy fits your investment or home-buying needs.
Start Making Offers Without Waiting to Sell Your Home
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.
What is a hard money lender?
A hard money lender is a private individual or company offering short-term loans secured by real estate. Unlike traditional lenders, who emphasize the borrower’s credit history and income, hard money lenders in Phoenix focus on the value of the property being used as collateral. Their clients often include house flippers and those buying rental properties, seeking quick access to funds with flexible terms.
Hard money lenders use the after-repair value (ARV), which is the estimated value of a property after renovations, to determine loan amounts. Typically, they offer a percentage of the ARV to ensure a secure and profitable investment. These loans usually have higher interest rates, ranging from 8% to 15%, and shorter repayment periods, often between 6 to 24 months. Additional costs may include origination fees, closing costs, and points paid upfront. If a borrower fails to repay the loan, the lender can seize the property to recover their investment.
How does a hard money loan work?
Hard money loans can offer the speed and flexibility needed to act on promising investment opportunities in Phoenix. Here’s a breakdown of how these loans work:
- Short-term loan: Hard money loans typically have a repayment period of 6 to 24 months, unlike the extended terms of conventional mortgages, which often range from 15 to 30 years.
- Faster funding option: When time is of the essence, hard money loans can be approved and funded within days — much quicker than the typical 30 to 50 days it takes for a traditional mortgage.
- Less focus on creditworthiness: Approval is less reliant on your credit score or income history, placing more emphasis on the property’s value.
- More focus on property value: These loans are secured by the property itself, with lenders considering the loan-to-value ratio of the collateral.
- Not traditional lenders: Hard money loans are often provided by private investors or specialized lending companies, not by traditional banks.
- Loan denial option: Ideal for those with poor credit who have significant home equity, hard money loans can be an alternative after being denied a conventional mortgage.
- Higher interest rates: Due to the higher risk involved, these loans come with higher interest rates compared to traditional mortgages.
- Might require larger down payments: Borrowers may need to make a larger down payment, sometimes as much as 20% to 30% of the property’s value.
- More flexibility: With less regulation, hard money lenders can offer flexible terms and criteria, often helping borrowers avoid foreclosure.
- Potential for interest-only payments: Some hard money loans may allow for initial interest-only or deferred payments, which can help manage cash flow in the short term.
What are hard money loans used for?
Hard money loans fulfill unique financial needs in the Phoenix real estate market. These loans are particularly beneficial for investors needing quick access to funds or those who struggle with traditional bank loan requirements. Here’s a look at common scenarios where hard money loans could be of use:
Flipping a house: For Phoenix investors focused on flipping homes, hard money loans provide quick cash for buying and renovating properties. This allows flippers to act fast in competitive markets, complete necessary renovations, and sell the property for a profit in a short time frame.
Buying an investment rental property: Investors aiming to purchase rental properties can utilize hard money loans to secure properties quickly, especially those in need of immediate repairs. These loans enable landlords to make renovations and start generating rental income faster than with traditional bank financing.
Purchasing commercial real estate: Hard money loans are ideal for commercial real estate transactions due to their flexibility and fast approval times. This can be crucial when quick decisions are necessary to secure valuable investments or capitalize on timely opportunities in the market.
Borrowers who can’t qualify for traditional loans: Individuals with significant home equity but poor credit or other issues often turn to hard money lenders. These loans are based more on the value of the property than on the borrower’s creditworthiness, providing an alternative for those unable to get conventional financing.
Homeowners facing foreclosure: Homeowners on the brink of foreclosure can use hard money loans to refinance their debts or buy time to sell their property. This can offer a temporary solution to avoid losing their home and the negative impact of a foreclosure on their credit report.
How much do hard money loans cost?
The cost of hard money loans is generally higher than traditional loans due to increased risk and quick, flexible funding. Here are some typical costs:
- Interest rates: These can range from 8% to 15%, depending on the lender’s risk assessment.
- Origination fees: Lenders may charge 1% to 5% of the total loan amount as an origination fee.
- Closing costs: Additional fees at closing can include legal fees, appraisal fees, and other administrative costs.
- Points: Lenders might charge points, a percentage of the loan amount paid upfront, which adds to the initial cost of obtaining the loan.
Online calculators can help you estimate these costs.
Alternatives to working with hard money lenders
If you’re a homeowner looking to tap into your current home’s equity, here are a few alternatives to consider:
Take out a second mortgage: Leveraging significant home equity through a home equity loan or home equity line of credit (HELOC) can provide funds at a more favorable interest rate than a hard money loan.
Cash-out refinance: By refinancing your existing mortgage, you can pull out cash to fund your new venture, often with better interest rates compared to hard money loans.
Borrow from family or friends: Personal loans from relatives or friends can offer more flexible repayment terms and potentially lower or no interest rates, making them an affordable option.
Use a government-backed loan program: FHA, VA, or USDA programs can help you purchase homes with lower down payments and reduced interest rates, making homeownership more accessible.
Peer-to-peer loans: These loans come from individual investors via platforms like Funding Circle, providing an alternative to traditional loans with different terms and conditions.
Specialized loan programs: Explore loans tailored for fixer-uppers or investment property refinancing, which can replace a hard money loan with better terms.
Request a seller financing option: Sometimes, sellers are willing to finance the purchase themselves, which can lead to lower closing costs and less stringent eligibility requirements.
How to buy before you sell
When the perfect home suddenly appears on the MLS, timing can be crucial. Perhaps it’s a remodeled ranch in North Central or a historic loft in Downtown Phoenix. If you’re a Phoenix homeowner eager to buy a new property before selling your current one, HomeLight has a solution to simplify the process.
HomeLight’s Buy Before You Sell (BBYS) program allows you to use your home’s equity to make a strong, non-contingent offer on a new house. Once your home qualifies, you can get approval for your equity unlock amount within 24 hours, with no upfront costs or other obligations. This approval lets you purchase your next home with confidence and sell your current one vacant, eliminating the hassle of moving twice.
Here’s how HomeLight Buy Before You Sell works:
The program charges a flat fee of 2.4% of the sale price of your current home. However, the potential savings in other areas can offset this cost. You might save on moving expenses, avoid temporary housing, and secure a better deal on your new home. Additionally, HomeLight’s BBYS fees are generally lower than bridge loan interest rates, which typically range from 9.5% to 12%.
3 top hard money lenders in Phoenix
Traditional lenders may not fit every real estate investment scenario. If you need to act quickly and seize an opportunity, consider partnering with one of these top-rated hard money lenders in Phoenix.
HD Lending
HD Lending, a hard money lender based in Phoenix, provides loans for residential, commercial, and multi-family properties throughout the State of Arizona. They specialize in unusual scenarios and offer fast funding and competitive pricing. Loan amounts range from $10,000 to over $1 million, and there’s no minimum FICO score required.
Lending clientele: Real estate investors (residential and commercial properties), and homeowners
Loan criteria: Depends on the loan program; typically, up to 65% of LTV
HD Lending has a perfect 5-star Google rating based on over 100 reviews. Previous customers commend the owner, Geoff, for his commitment to customer service, quick and efficient closings, and thorough communication. “Geoff is always available. Seamless transaction. What we spoke about from the beginning is exactly what happened. Will most definitely be using HD Lending in the future for all my clients needing hard money,” wrote one reviewer.
480-688-8686
Hard Money Lenders Arizona
Hard Money Lenders Arizona is based in Phoenix and specializes in private funding for various real estate needs. The company offers hard money loan programs for residential owner and non-owner-occupied properties, and many other options for flippers, landlords, and developers. They advertise lightning-fast turnaround times; business purpose loans can be processed in as little as 24 hours.
Lending clientele: Real estate investors (residential and commercial properties), and homeowners
Loan criteria: Up to 85% LTV or LTC; in some cases, up to 90%
Hard Money Lenders Arizona has an impressive 4.9-star Google rating based on over 200 reviews. Clients say the owner, Michael, and his team are dependable, communicative, and extremely knowledgeable. “Michael was super friendly, always available by phone, and helped explain and guide us through the entire process,” reads a recent review “It was smooth and fast from day 1.”
480-576-5822
Hard Money AZ
Hard Money AZ specializes in financing solutions for Arizona homeowners and real estate investors. They provide hard money loans, commercial loans, fix-and-flip loans, and construction loans. The company has funded over $1 billion in the last four decades. Loans can close in as little as five days, and it takes just five minutes to submit an application through their website.
Lending clientele: Real estate investors (residential and commercial properties), and homeowners
Loan criteria: Contact Hard Money AZ for more information
Hard Money AZ holds a 5-star Google rating based on over 30 reviews. Clients praise the company’s straightforward application process, fair terms, and quick turnaround times. “I needed a loan fast, and they got it sorted quicker than any mortgage lender I’ve talked to before,” wrote one client. “They really supported me through my project.”
646-598-815
Investing in real estate?
Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.
Should I partner with a hard money lender in Phoenix?
Deciding whether a hard money loan is the right choice for you depends on your specific real estate goals and financial situation. Hard money loans are best suited for Phoenix real estate investors who need quick access to funds, have a short project timeline, or can’t secure traditional financing. These loans offer fast, flexible funding but come with higher interest rates and shorter repayment terms.
For Phoenix homeowners looking to leverage their equity without the high costs associated with hard money loans, HomeLight’s Buy Before You Sell program is a compelling alternative. This program allows you to make a competitive offer on a new home using your current home’s equity, all while paying a small flat fee. It simplifies the moving process and avoids the hefty interest rates typical of hard money loans.
As with any significant financial decision, it’s important to consider your long-term investment strategy and consult with a financial advisor. If you’re interested in connecting with real estate professionals in Phoenix who can guide you through either option, let HomeLight introduce you to top agents and trusted lenders in the area.
Header Image Source: (Chris Tingom/Unsplash)
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