Are you considering taking out a hard money loan? If so, it's important that you understand the license requirements of hard money lenders. Hard money lenders that issue commercial loans often aren't subject to the stringent Arizona license requirements compared to owner occupied lenders.
Knowing the requirements of your hard money lender ensures the entire loan process flows smoothly, without any last minute disruptions.
Do Hard Money Lenders Need to be Licensed in Arizona?
Unfortunately, the license requirements for hard money lenders in Arizona fall into a gray area. Although it's true that private money lenders in Arizona don't always need a license to issue commercial hard money loans, residential hard money loans are treated differently.
Hard money lenders issuing a loan to a business that fixes up residential property may classify the loan as commercial, thus subject to commercial loan requirements. These guidelines don't require a specific license.
However, if the hard money lender issues a loan for an owner occupied primary residence, they will be subject to Arizona's license requirements. This is one of the main reasons that many Arizona hard money lenders are hesitant to issue hard money loans for owner occupied property.
What is Involved in the Arizona Licensure Process?
The Arizona residential lender licensing process can be tedious, which is why many commercial hard money lenders don't go through the process. Arizona mortgage loan originators are required to pass a national exam, fulfill the necessary education credits, demonstrate financial responsibility through a credit check, retain the proper surety bond, and complete a background check.
Once the licensure is obtained, Arizona requires at least 20 hours of continuing education in various areas, such as ethics and federal law. Additionally, licensed Arizona hard money lenders issuing owner occupied loans will need to comply with different federal and state regulations surrounding underwriting.
Are Licensed Hard Money Lenders Better?
When it comes to evaluating hard money lenders, you shouldn't automatically preclude certain lenders based on their licensure. Experience, education, and services are all important factors to consider.
Real estate investors generally won't have to worry about the licensure of their hard money lender. The commercial lending landscape is much more lenient compared to the residential realm. Multi-family units, fix and flip, investment property, mixed-use property, and small commercial properties are all usually categorized as commercial loans.
However, if you are looking to purchase an owner occupied property, the proper licensure is often non-negotiable. You don't want your loan to fall through because your hard money lender doesn't have the proper license.
At the end of the day, Arizona hard money lenders don't always need to be licensed. Nevertheless, working with a licensed hard money lender ensures that they can design a loan to fit your needs, regardless of if it's owner occupied.
At Easy Financing, we retain the licensure to issue all types of hard money loans, including owner occupied. Reach out today to schedule your free consultation with one of our team members.