While banking institutions offer mortgages, their criteria eliminate borrowers who don’t meet their standards. Public lending companies want collateral matching the amount borrowed to sell it when they don’t get their money back. Private lending companies are an option if neither works for you. The advantages of private lenders for mortgages are:
1- Lenient Qualification and Application Process
Local, regional, and national banks operate the same. They expect you to have near-perfect paperwork and fit their image of a reliable borrower. It takes years to clean up your credit history and raise your score. You may have gaps in your work history or use 1099s instead of W2s. Maybe you owe taxes. Not everyone is the same. Private lending services are less strict on criteria.
Their flexibility allows them to take risks with people who don’t meet 100% of the bank’s criteria. If you are eligible for a mortgage, they will offer customized choices based on what you provide. Additionally, they use the home’s market value to decide the amount you can borrow. Don’t expect banks to take those risks.
2- Faster Processing and Approval
Assuming you meet their qualifications, the approval process is faster than traditional banks. That is helpful for borrowers who need to buy a property quickly. They will move just as fast to secure a mortgage for you. With no red tape or hoops to maneuver to secure a loan, you can expect an answer in as little as two weeks.
Conversely, a bank takes months to examine and confirm every detail of your financial and professional life before getting approval. You must pass up homes that need a quick response and work around the bank’s time.
3- Flexible Negotiations
Qualified borrowers can customize their mortgage options to suit their needs. Private lenders allow negotiation on down payment, repayment schedule, interest rates, loan terms, closing costs, insurance, and reduced fees. That will make repaying the mortgage to the lender more manageable, and lenders are more likely to recoup their finances from you. What qualified people are eligible to negotiate? Everyone.
Meanwhile, banks only allow negotiations with borrowers who have excellent qualifications. If those people have more than one offer, that’s another reason for banks to negotiate. Approved borrowers who fall short of provisions must accept the terms as-is.
4- Local Expertise
National banks rely on interstate and nationwide sources to gauge evaluations, and regional banks focus on their region. Local banks have strict mortgage applications that overpower local needs. Private lenders focus fully on local market evaluations that banks overlook. That information helps lenders understand the home’s location, neighborhood, and value better than most. Looking at national and regional assessments may have some merit, but their preference is to get to know you and your property.
Add private lenders to your mortgage search. It’s an excellent choice for borrowers who don’t fit the mold, like self-employed workers, foreign buyers, and fix-and-flip investors. It is also great for borrowers with less-than-perfect finances. Private lenders give borrowers who fall short of bank qualifications a chance to secure a mortgage.