Applying for a traditional mortgage loan can feel like a bit of a headache, especially for those that don’t meet specific lending criteria that financial institutions, such as banks and credit unions, impose on borrowers. What many borrowers don’t realize is that using private mortgage lenders is often a better option and can make securing a real estate loan much more streamlined. Private mortgage lenders can offer alternative financing solutions directly to those seeking a real estate mortgage. However, there are some key differences between private mortgage lenders and traditional lenders that you should know before you commit to any financing strategy.
Let’s explore what makes private lenders unique, as well as what options and advantages they offer so that you can make a more informed real estate financing decision.
Who Are Private Mortgage Lenders?
Private mortgage lenders offer private money mortgage solutions for borrowers seeking unique real estate loan alternatives to traditional mortgages. As the name suggests, private mortgage lenders are often private individuals, investors, companies, or trusts that lend money using an asset-based approach.
Private mortgage lenders work with you to develop a solution that meets your specific real estate objectives, often requiring fewer conditions for approval translating into faster funding. While the repayment terms private mortgage lenders offer can vary, you can expect greater flexibility in the solutions being offered.
What’s the Difference Between Private Mortgage Lenders and Traditional Mortgage Lenders?
While both private mortgage lenders and traditional mortgage lenders loan money to borrowers for real estate purposes, there are several key differences that set both of these types of lenders apart.
To start, private mortgage lenders tend to be private companies or investors whereas traditional mortgages mostly come from formal financial institutions like banks and credit unions.
Unlike traditional mortgage lenders, who must adhere to specific federal criteria when offering a traditional mortgage loan, private mortgage lenders don’t have to follow the same set of rules, allowing for greater flexibility and less stringent eligibility criteria.
Another difference is that traditional mortgage loan durations commonly span 15 to 30 years, whereas private mortgage lenders usually offer short-term financing solutions. Private mortgage loan durations usually cover 1 to 5 years but can be shorter in certain situations.
Lastly, while private mortgage lenders rates are usually a bit higher than traditional loans, private mortgage lenders can typically underwrite and approve your private mortgage loan in as little as a few minutes. This is exceptionally fast when compared to a traditional mortgage which the approval process can take upwards of 30 to 60 days on average.
Advantages of Private Mortgages For Borrowers
· Easier to Qualify
Private mortgage lenders use an asset-based lending approach, putting more emphasis the underlying real estate being used as collateral than borrower characteristics such as credit score. This allows private mortgage lenders to be more flexible with their eligibility criteria.
· Minimal Paperwork
Fewer qualifying criteria allows private mortgage lenders to collect few documents and really streamline the application process. This results in a better customer experience and a private mortgage solution tailored uniquely to your needs.
· Quick Approval and Funding
Private mortgage lenders often have a simplified application process because they put less scrutiny on certain underwriting criteria that traditional lenders require. This leads to a faster approval and funding process, getting you results now rather than later.
Understanding Your Options From Private Mortgage Lenders
Deciding to open a new mortgage loan is a big financial decision. Its important you understand and consider all your options choosing the mortgage loan product. Many borrowers turn to private mortgage lenders for help with:
Bad Credit Loans
Whether you are proactively trying to rebuild our credit, have recently filed for bankruptcy, or have fallen behind on past mortgage payments, owner occupied private mortgage lenders in California can offer bad credit financing to help get you back on the right track.
Private mortgage lenders understand that your credit score should not be the sole determinator for approving a new real estate loan. While many traditional lenders may quickly reject your credit request, private mortgage lenders can work with you to get you the financing you need, fast!
Fix-and-Flip and Rehab Loans
Many private mortgage lenders specialize in investor fix-and-flip loans used to buy a property, renovate, and sell it for a profit. Sometimes referred to as rehab loans, these short-term loans can come with a lot of red tape, which is why traditional lenders often steer clear from these requests. Private mortgage lenders understand the valuation process, help guide you through the rehab specs, and provide quick financing solutions to your unique needs.
Residential Bridge Loans
Sometimes the timing of selling a current home doesn’t always align with your next real estate purchase. Instead of waiting around for your sale to close, potentially losing out on future real estate opportunities, private mortgage lenders can offer residential bridge loans which will “bridge” the financing gap these situations usually require.
Cash Out Refinance Loans
Leveraging existing real estate assets is the perfect way to get a quick infusion of cash when you need it. Private mortgage lenders can offer cash out refinance loans to help provide the liquidity you need to consolidate debt, fund a new real estate investment opportunity, or improve cash flow in a commercial enterprise.
Second Mortgage Loans
Like many homeowners and investors, you may be considering taking advantage of the excess equity you have in the real estate you own. Rather than sacrifice your lower interest rate on your first mortgage loan, private second mortgage lenders can help you utilize a private second mortgage loan to help finance your financial objectives.
Investment Property Loans
New and seasoned real estate investors often turn to private mortgage lenders for private purchase mortgages for investment properties. Known for their quick approvals and flexible financing solutions, private mortgage lenders are the preferred method for financing any real estate investing strategy.
Probate and Estate Loans
Its never easy when a loved one passes away. These situations can get a bit sticky, especially when try to administer person’s estate that has ongoing expenses. Private mortgage lenders can often help by providing probate and estate loans to help cover the estate’s obligations, helping to satisfy and close a decedent’s estate promptly, avoiding a lengthy probate process.
Trust Loans
Due to their unique nature and how they are set up, most traditional lenders don’t offer trust loans. However, private mortgage lenders are more than capable of offering this powerful financing solution. While no two trust financing situations are the same, you can bet private mortgage lenders have the knowledge and expertise to develop the right solution tailored to your needs.
Private Mortgage Lenders, Independent Lending
Independent Lending is the leading private mortgage lender servicing California, Florida, Texas, and Arizona markets, helping you better understand your mortgage options to help you make a more informed financing decision. Having provided over $500 million in mortgage financing since 2013, our private mortgage partners have over 40 years of combined experience crafting flexible private mortgage solutions tailored to your real estate objectives.
Whether you are investing a new piece or real estate, need extra liquidity, or have a complex credit request, we will work diligently to provide timely, efficient, and professional service throughout the entire loan experience. Check out what our clients are saying on Zillow and Google about the value we provide or contact us today to learn about how our private mortgage solutions can support your financial objectives.
