Can I get a Private Mortgage Loan?

If you are considering investing in real estate, then you might want to look into a private mortgage loan instead of a loan from a traditional source such as a bank, credit union, or lending institution. A private loan will have a much shorter term than a traditional mortgage, with terms running from as little as a few months to just a few years. These loans are popular with investors for several key reasons, including the speed and ease of closing the deal and the amount of money available from the private sources versus lending institutions and traditional mortgages.

What does the lender look for?
The lender looks at several things when considering whether to approve you for a private mortgage loan. One of these things is whether the property itself will be able to fund the repayment of the loan. The private lender will only lend a certain percent of the value of the property being put up for collateral, and will want to be sure that the property will be worth the effort to them should they be forced to take it as payment for the loan. They will also want to know if you will be able to make enough money off of the property to pay back the loan at the interest that they will be charging.

Private home loans are much more expensive than traditional loans in terms of interest rates, with rates going from 14 to 18 percent or higher, and rarely dropping much lower than the mid teens. If this is the only way that you can finance a house, then your options are to pay the interest that they offer you or wait until you have a better avenue.

The type of property is also important to the lender, since a multi-tenant building or office will produce greater cash flow and be more disposable than a single family home should they be forced to sell it quickly.

They will also want to know what your exit strategy is for the loan. This means that if you intend to repay the loan in full by refinancing, they will want to know if your credit score is good enough to get a mortgage loan to refinance with or not. This is important to the lender since the loans are very short term.

What doesn’t the lender look for?
The lender does not care what your income is, as long as the property in question will produce enough cash to cover the loan or as long as you have other properties with cash flow that will do the same. They do not care what your credit score is unless you are planning to pay off the loan by refinancing, and so they do not care if you have a poor credit history. The property in question is the collateral that they need. The lender does not care if you have been turned down for traditional loans just as long as you have a viable exit strategy in hand and the plan to make the loan work for both of you.