In Arizona, and many other states, hard-money loans are a means of financing a real estate purchase or development without many of the procedural hurdles associated with bank loans. Private businesses and investors offer hard-money loans on a shorter period, but with higher interest rates and other expenses.
Unlike banks, which focus on a borrower’s ability to repay a loan, hard-money lenders usually look at the value of the collateral when deciding to make a loan. Barrett Financial Group actively works with their clientele investing in Arizona real estate to fund millions in hard money loans for investors every month in Arizona and California, the company announced in a release.
“The Arizona hard money loan mortgage market has greatly expanded since the 2009 mortgage crisis with the passing of the Dodd-Frank Act. Dodd-Frank has created new obligations for hard-money lenders who loan money for residential properties in some circumstances. It has also potentially made this type of loan more appealing for commercial real estate,” Barrett Financial Group said in the release.
“The reason for this expansion is primarily due to the strict regulation put on banks and lenders in the mortgage qualification process. The Dodd-Frank and Truth in Lending Act set forth federal guidelines requiring mortgage originators, lenders and mortgage brokers to evaluate the borrower’s ability to repay the loan on primary residences or face huge fines for noncompliance.”
Because the primary basis for making a hard money loan is the liquidation value of the collateral backing the note, hard money lenders will always want to determine the LTV (loan to value) prior to making any extension of financing. A hard money lender determines the value of the property through a BPO (broker price opinion) or an independent appraisal done by a licensed appraiser in the state in which the property is located, according to Barrett Financial Group.
The company’s loan programs are designed for Arizona real estate investment professionals and to help make the process of investment funding fast and easy. Their programs focus on single-family residential properties (1-4 units) in Arizona and California.