A lot of people are afraid of applying for a private mortgage despite hearing a lot of good things about it and how it can benefit them because they worry that they might mess up and cause more financial issues on their side. That shouldn’t be the case, more so now that there is an increasing interest in getting a private mortgage because not everyone have impeccable credit ratings and can borrow brow traditional lenders.
What is a Private Mortgage and Why Get it
A private mortgage is a type of loan that you can get from a business, institution, or an individual that is not a traditional lender of mortgage. When done correctly, getting a private mortgage will create a win-win scenario for everyone where each party involved gains financially without going through too much risk.
But here’s the thing, we’ll be talking about getting a private mortgage in here from a party that is known to you or known to us. Trying to get one from cold contact is referred to as a hard money loan so we will not be tackling that.
So, why get a private mortgage from private lenders and not try to get a loan from other funding solutions?
Although there are a lot of possible lenders like local credit unions, big banks, online lenders, and their likes, getting a loan from them isn’t as easy as filling up an application form and getting approved.
The go-to lenders often have a lot of qualifying criteria in place such as you being able to provide certain documentation, being a resident for a certain number of years, having a good credit score, being employed for a specified number of years and so on. What if you’re a self-employed individual? Where are you going to get some of these forms? Or how about if you’re a young adult just starting out in life and have no credit score yet to speak of.
When you go the private route, you can save on paying interest and will have better chances of being lent the money that you need.
Issues When Getting a Private Mortgage
You have to keep in mind that even with the best intentions, deals can go awry and some issues will come up. This means that if you know your lender in real life, relationship strain might become an issue when you can’t pay or when they decide to give you higher interest than what you are expecting. This is why having a third party draw up terms can be very beneficial.
Another possibility is you may not get the loan you want because the lender will have to also cover their bases and consider property value fluctuations. This means that if your house is worth $500,000, the amount you’ll be able to borrow would be a lot less than that to account for other scenarios down the road.
Also note that maintaining the house is your responsibility so is checking that the title is good and that all taxes are paid on time. Once you note this and all of the above, you are ready to apply for a private mortgage and draw up private mortgage agreements with the help of a trusted private mortgage broker.
Using a private mortgage has many advantages. If you feel that you’re ready to apply for a private mortgage, don’t hesitate to contact us so we can assist you with getting one and making sure that the terms are what you can handle.