JSMedia – While most homeowners seek a mortgage from a financial institution, many of them are turned down for various reasons. One of the best options for homeowners with bad credit is to look to private mortgage lenders. These companies offer flexible terms and can lend as much as 80 percent of the appraised value of the property. There are several advantages of working with a private lender. Let’s discuss some of these advantages to get more Benefits of Private Mortgage Lenders.
Private lenders typically charge higher interest rates than traditional mortgage loan sources. This is primarily due to the increased risk that private lenders carry. In addition, their loans are usually secured by real property, so they have less stringent requirements. However, because these loans are secured by real estate, these private mortgages can be a lucrative business. Because investors need cash flow immediately, private lenders can provide the necessary funds for immediate investment.
Compared to traditional lenders, private mortgages have less documentation and underwriting criteria. Unlike traditional lenders, these companies do not have a minimum credit score or analyze borrowers’ debt-to-income ratio. They can also approve loans much faster. Additionally, they can work with borrowers who don’t have a good credit history. In addition, they can also work with nontraditional job situations.
Benefits of Private Mortgage Lenders
Another benefit of working with private mortgage lenders is that they are more lenient in the loan application process than traditional lenders. For instance, private mortgage loans represent 65 percent or 70% of the appraised value of an income-producing property. For non-income-producing properties, the loan to value ratio is no greater than 55 percent. In the current low interest rate environment, borrowers can expect 12-to-14 percent interest rates on first liens and 16 to 18 percent for second liens.
Private mortgage lenders offer a variety of loan options. These loans are typically 65 percent to 70 percent of the appraised value of income-producing property, while they are 45 percent to 50 percent of the value of non-income-producing property. In a low-interest rate environment, borrowers can expect 12 percent to 14-percent interest rates on first liens and up to 18 percent for second liens.
The loan application process for a private mortgage is typically quicker and easier than with a traditional lender. In most cases, a private mortgage lender can approve a borrower’s application within 24 hours, while a traditional loan may take 45 days. Moreover, the approval process for a private mortgage is faster than with a traditional bank. Besides, a private mortgage lender can provide a lower LTV ratio compared to a conventional one, which means fewer fees for the borrower.
In addition to speedy processing, private mortgage lenders can also help reduce costs. Their loan process is more streamlined than that of a conventional mortgage lender, which must wait for approval from a loan committee. And the time taken to process a private mortgage is significantly less than that of a conventional lender. In addition, the lender can get the loan approved faster than an institutional one. Further, they do not have to wait for the lender to verify the borrower’s income or credit history, which can greatly affect the cost of the transaction.
While private mortgage lenders can offer lower interest rates than a traditional lender, they must be able to get a higher interest rate than a bank account, and that is what makes them attractive to both lenders and borrowers. Using a private mortgage lender is a smart option for a homeowner with bad credit, as it offers more flexibility. This is a win-win situation for all parties.
Traditionally, private mortgage lenders are not willing to lend to people with bad credit or high debt-to-income ratios. Nonetheless, they are willing to extend more favorable terms than a traditional lender. A private mortgage can be easier to obtain for a home with iffy credit and can also have a better interest rate than a conventional lender. A private mortgage is a better option for those with bad credit.