Private mortgage lenders are people like you and me. The big difference is that these people have money available to lend to others. But they most likely will not make a personal loan. They want some security to ensure that the loan will be paid back. So they are willing to lend their money with a security interest in real estate.
So these private lenders are the people in the current economy who have the money right now. They managed to keep it, and intend to hold onto it. That means that these private money lenders are only willing to lend their money where they figure that they have a slim chance of losing it. They are very protective of their money and do not want to put it into a bad deal.
With that in mind, where are they located? In fact they could be anywhere. But most likely they have contacted someone as a go-between to represent them to the prospective borrowers. They don’t have the experience to do all the checking to make sure that their money will be protected. So these people who are in a position to lend money and really want to do so most likely will have contacted someone who they trust to represent them.
This is where the mortgage brokers come in. Licensed mortgage brokers have the know how and information to check out prospective borrowers and connect them up with the private mortgage lenders.
Private Mortgage Lenders And Mortgage Brokers
One of the best ways to get in touch with a private mortgage lender is to find a good licensed mortgage broker. These days most mortgage brokers have connections to several private mortgage lenders. These brokers know that the banks are not doing the lending that they used to do. In addition, the requirements of the banks have gotten so high that most people can’t get a mortgage loan through a bank any more.
So in order to survive in this market place the mortgage brokers have had to seek out others to provide the funding for their clients. That‘s where the private mortgage lender comes in. These are people who have money to invest in mortgage loans and are willing to do so. In fact they want to invest. They see this as a great opportunity to get into real estate and get a good return on their money.
So start your search with mortgage brokers and find out who in your area is making the most loans to private mortgage lenders. That person most likely has a large list of individuals that would suit your particular funding needs.
One caveat here is to check out the reputation of the mortgage broker. Make sure that the broker is properly licensed to do business in your area and is also in good standing. There have been stories of some mortgage brokers who have done shady deals that left both their clients and lenders hanging after the deals were supposed to have been closed.
Private Mortgage Lenders – Experienced Or Just Starting Out?
With a new private mortgage lender you might get a better interest rate or longer terms because the new private lender hasn’t had the experience and track record to compare how the lender could do with other borrowers.
Most new private mortgage lenders are told to be flexible so that they will be able to lend their money. If they are not willing to make a deal they might not get the opportunity to put their money to work. Think of mortgage lending for a private lender just like a bank trying to lend money. The private mortgage lender is in competition with all the other private money lenders out there, at lease in their local area.
Private Mortgage Lender’s Peculiarities
Most private mortgage lenders also have their favorite type of project that they will lend their money for. Someone who is just starting out as a private money lender might not have had the chance to determine which type of project they want to make a loan for yet. They are just trying to put their money to work.
Remember that when you are dealing with a private mortgage lender you are dealing with a particular individual not an organization. Each individual has likes and dislikes. Each person also has their particular interests. So, one individual may be interested in making a loan just because you happen to like their favorite sports team or school, or political affiliations or religious affiliation.
So it makes sense to find out as much as you can about the private mortgage lender before you have any meeting with him or her. Then you can pitch your particular project or deal in a way that has the most chance of being accepted.
Also don’t discount personality factors in the private money lending sector. Someone who is a private mortgage lender may not fit with your particular personality type. The private money lender may find you offensive in some way and wouldn’t lend to you under any circumstances. So this is another good reason to find out who the private money lender is first.
Private Mortgage Lender’s Funding Capabilities
It can also make a difference in terms of how much the private money lender has available to lend. If you’re looking for $200,000 for a particular loan and that is close to the total amount that the lender has to invest, that lender may turn you down just because the lender doesn’t want to put all their investing money in one place.
Private money lenders who have been lending for some time usually have more money to work with and most likely have their percentages all figured out ahead of time. So they know how much risk each loan will be and what percentage of their total investment pool it represents. The know what they can afford to lose and still keep lending.
Private Mortgage Lending And Levels Of Risk
One thing to keep in mind when dealing with private mortgage lenders is that these private money lenders are working with their own money. It’s a big risk that these lenders are taking to lend out their money. From their perspective, if the project or deal goes bad, they could stand to lose everything. So be prepared to deal with this hesitance on the part of any investor.
New private money investors in the private mortgage lending business might be more inclined to ask for more or additional levels of security for lending their money. They might be more inclined to convince themselves that they have a sure thing with their loans. So that might mean you’ll have to provide additional information and assurances for these lenders.
So which is better, the private lender who has done many deals over a period of time or the private money lender who is just starting out? It’s really up to you to decide. You can work with someone who would be more like a bank or someone who would like to make a loan to get started and would be willing to make concessions to get that opportunity. They both have their advantages. In the end it may be the personalities of the individuals on both sides that would seal the deal.
Find out as much as you can about the person you will be dealing with before any meeting, because it just might be that you both like the same baseball team or you happen to like the same type of music. You never know what might really make the loan work for you. But as stated above, the more you know the better your chances.
Who Else Will You Be Dealing With Besides Private Mortgage Lenders?
When you are seeking funding in the private sector for a project, you need to be prepared to deal with many different people in addition to the private mortgage lender. These are some of the people who will most likely get involved.
- County Officials
- HOA Officials
- Insurance Agent
- Title Company
Although this list is not exhaustive, you most likely will be involved with the private mortgage lender’s appraiser, inspectors, and possibly title company. You will also want to choose others to represent you in the transaction like your attorney and your own inspectors, say for a warranty type inspection.
If you’re working through a good mortgage broker to deal with the private mortgage lender, the mortgage broker will have a list of the professionals that the broker deals with on a regular basis. This can be both good and bad. You will most likely get licensed professionals who know their area of expertise. But in many cases these are also people who are in the broker’s network because they feed deals to the broker. So there may be favorites in the group who might not necessarily be the best or who would be looking out for your interests.
Private mortgage lenders are out there and the right one is within your reach, if you seek out the people who represent them, the licensed mortgage brokers.
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