How to Use a Bridge Loan to Invest in Real Estate
Just like their namesake, Arizona Bridge Loans are designed to safely get you where you’re going, often over troubled waters. But how exactly do they work and how can you get one? Here’s what you need to know.
First, what are they? They’re a temporary infusion of funds to get you where you need to go until you can secure more permanent funding. For instance, let’s say you’ve purchased a flip and you’re waiting for funds to make repairs and do improvements. An Arizona Bridge Loan can help you get started while you wait for other funding. After all, the real estate game is all about timing; the faster you start on renovations, the faster you can get the home or commercial property sold and turn a profit.
There are two types: ones done by conventional banks and credit unions and ones done by private, accredited lenders. Which style works best for you?
Choosing the Right Arizona Bridge Loan for Your Situation
If you go with a traditional loan from a bank, you’ll probably get fairly low rates. However, there are a number of qualifications that many real estate investors can’t possibly meet. Banks will analyze your financial history, your current situation, and your future prospects ad nauseam. They’ll make sure your credit score falls within their acceptable range; they’ll dig deep into your past, and they’ll check out your bank account and other assets to determine if you’re too much of a risk.
If you do fit into their box and you’re approved, funding may take a while to come through and your loan fees can add up to thousands of dollars, even on small loans.
Conversely, you can go with a hard money lender. Their rates will typically be higher than a bank. However, there are a variety of reasons many investors prefer to go this route. The biggest one is this: Arizona Hard Money Loans are secured by collateral. This means that, for the hard money lender, things like lower credit scores, previous short sales, and less healthy bank account balances don’t carry as much weight.
Securing a Hard Money Arizona Bridge Loan
The funds for a hard money Arizona Bridge Loan comes from private sources, so there’s no complicated underwriting, no debilitating red tape, and no guidelines that are set in stone. In other words, you and your broker can sit down, talk about your unique situation, and work out terms and rates that make sense for both of you.
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