If you are an investor looking for resources to finance your next real estate purchase, you may want to consider private mortgage lenders. A primary difference between these financiers and traditional mortgage lenders the former provides special lender services. The latter is usually a group of banks.
Additionally, private financiers are more flexible, which is what real estate investors need to structure the types of loans necessary to close their deals.
Other key differences can make your decision easier, especially considering that traditional lenders are not likely to finance your purchases.
Qualifying for Mortgages
The qualification process is another key difference between private lending and other financing sources. Traditional lenders will focus on your credit history, financial statements, tax returns and the level of debt you have currently.
In contrast, using a private lender means you are not required to provide such details as a means to getting approved. Rather, their primary concern is the appraised value of the property you want to acquire.
This main criterion is set because a high value helps to guarantee providing the financing is a good investment.
In addition to the value, these lenders also want to consider whether the property is poised to produce income. With these two elements, you have a good chance of securing the loan.
Most loans are not valued above 70% of the property’s appraised value. If the property does not produce expected income, you will receive a lower percentage.
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Another advantage to using these financiers is the speed of closing on a property deal. Unlike the time it takes with traditional lenders, the private firm you choose can complete the entire transaction in about one week. Compare this length of time to the two or three month wait that normally occurs with traditional mortgage providers.
Usually, traditional banks say they have approvals within 24 hours. However, those are often conditional and will require that you provide more details and paperwork to get a full response.
Private lenders, on the other hand, can provide an approval for most situations within the 24-hour timeframe and it will mean that you are approved.
The next time you are looking to finance a good real estate deal, think about other options before starting the process with traditional mortgage lenders.
While there are a variety of options, think about which one makes the most sense for what you are trying to accomplish. You do not want to miss out on a good property investment waiting for 30 days or more to get approved.