Private Lenders for Mortgages

Scholasticus K Jan 27, 2019
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Private lenders are individuals or group of individuals that lend money to people companies, institutions who require instant loans or funds. These lenders also fund mortgage loans or high risk loans that have been turned down by conventional lenders.
Most of us know that private money lenders are the ones that provide secured loans or rather mortgages that help people finance their investments in real estates. There are several variants of the real estate loans that are provided by private lenders. There are two basic advantages of borrowing real estate and home loans from such private lenders:
✓ The loan is underwritten and sanctioned irrespective of the credit ratings and scores.

✓ The second advantage is that the private mortgage loans are often tailored according to your specifications. Such a loan certainly offers a considerable amount of convenience.
Banks and public finance institutes are engaged in the economic activity of generation of loans. These organizations use various public funds and investments to generate loans and credit. Thus, these institutes cannot lend money to people who have a credit score below a certain limit.
Apart from that, government agencies and government sponsored organizations, such as Freddie Mac and Fannie Mae, have put forth several underwriting guidelines to calculate the possible risk of the loan being defaulted. These guidelines of pre-approval assessment are very, very strict.
Thus, if one wants to take a loan from regular banks or financial institutions, one needs a picture prefect credit report, good credit ratings and a score which is above the prescribed limit. The real estate that is to be purchased and pledged, is assessed as if its market value shows a negative projection. The loan application in such cases is rejected.

Private Lenders for Real Estate

Here is where private lenders for mortgages and real estate loans step in. These mortgage lenders, as the name suggests are private institutions or in some cases are individuals who lend money, out of their own finances. Private lenders lend loans that have a high rate of interest and are usually secured to some or the other assets.
Private lenders often lend loans to people who have a bad credit rating or have a collateral that (security) shows a downward market value. If you are planning to borrow a loan from private lenders, then there are three important features of such a loan that you should definitely know:
1. The loan is bound to be a high interest loan, with the APR (annual percentage rate) or the interest rate being a bit higher than the usual loans.
2. Secondly, the loan is bound to be secured loan, the security or collateral being the real estate that has been purchased with the help of this loan.

3. Lastly, the loan will have high late payment fines and will be of course subject to foreclosure in case if the loan is defaulted.

Loans and Mortgages by Private Lenders

There is a wide variety of private loans that are originated by lenders. The most common being the ordinary mortgage loans. These loans are so formulated that the borrower can borrow a loan to purchase a property or real estate, which in return is pledged with the lender.
The repayment procedure of the loan often extends over several years, in some cases also over a couple of decades. The private money lenders also originate other loans such as mortgageable refinance loans, which help the person to replace the existing loan with a new one.
The mortgages can be fixed rate mortgages or adjustable rate mortgages, which is also known as ARM. Apart from that, real estate loans such as home equity loans or home equity debt consolidation loans are also originated by such lenders. But again, the interest rate is high.
A point to remember while borrowing such loans, it is absolutely necessary to keep track of all installments (mortgage payments) and also keep a good balance in the bank account which would come in handy during emergencies.
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