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Need an Arizona Construction Loan to Build Your Dreams?

By Dennis Dahlberg Broker/RI 623-582-4444

Mortgage and Lending with Level 4 Funding NMLS 1018071 AZMB 0923961

January 27, 2020 03:00 PM

An ‘Arizona Construction Loan’ is designed just for development. Read on and let’s find out if they are what you need.

An Arizona Construction Loan, commonly called a ‘self build’ loan, is actually two different loans; the first part will cover your project’s upfront costs. You will pay interest-only payments while your apartment building, string of houses, office complex, etc. is being built. Following this period, the principle will have come due set up in monthly payments on what is termed a permanent loan. The quicker you can finish the construction itself; the less interest has to be paid i.e. the cost of your loan will be smaller.

And speaking of interest, these loans’ rates of interest can go up and down like the temperature, depending on the market interest rates. Normally the amount is the Prime rate with one or two percent tacked on.

A private lender, while unlike traditional lenders in a number of ways, is still going to want to see your books and plan of operation. Once you have chosen your lender, have everything you need in order to avoid delays, get the end result you desire (the money you need) and prove you’re a professional who isn’t wasting the lender’s valuable time.

You will need to account for the following things in order to present the entire cost picture:

1. hard costs: materials and labor needed.

2. land costs: purchasing land and property, occasionally termed ‘soft costs’.

3. soft costs: architect’s designs, taxes, insurance, appraisal(s), permits, etc.

4. contingency fund: reserve funding that is used for interest payments

Generally for an Arizona Construction Loan, private or hard sources of funding are easier to obtain than traditional or government sources. Why is this true?

Banks and other conventional lenders will run your employment history, credit record and how much you already owe (debt-to-income ratio) through a fine screen and check every detail. A past foreclosure, late payments on a loan, even self employment with a good record--all these can stop a conventional application from going through. The time element figures in also since banks and other similar lenders can take 30 days or more to fund your loan once application is made.

Hard money looks at collateral value and your ability to repay a loan more so than traditional lending institutions. This secures the lender’s money since if you cannot repay, the collateral can be sold to cover their losses. Other securities for the lender are a down payment, which is often required, and higher rates of interest.

Often these lenders do case-by-case evaluations and determine the loan amount based on each individual application.

Time is of the essence in the majority of cases and most private lenders make decisions in a very short time. Sometimes approval and funding can be completed in as short a time as two days, with no credit check or tax information required.

If you think an Arizona Construction Loan is for you, start building your portfolio first, then find a lender who can aid you in creating something more substantial than paper and pictures.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 44 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 43 years.