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How to obtain a private money mortgage....
money mortgages are loans secured by real estate made by a private
lender instead of a bank, lending institution or government agency.
Private money mortgages loans are short-term (generally six months to
two years) asset based loans made to the professional real estate
investor for the purchase, rehabilitation or equity cash out of real
property. This means that the decision to lend is based on the equity
and value of the property being put up as collateral, not on the
borrowers credit. The security for the loan is based upon fact that the
loan will be for no more than 65%-70% of the appraised value of the
income producing property. Non-income producing property (generally land
or vacant commercial property) can expect a loan to value of no more
than 55-60 %. Interest rates can be expected to be considerably higher
than conventional loans, usually 4-6 % above prime.
Why would someone be interested in obtaining a loan like this. The
reasons are simple:
Problems in qualifying. The borrower and/or the income of the
property does not qualify for an traditional mortgage loan. It might be
credit trouble from the borrowers past, excessive debt or the property
is not producing a sufficient cash flow to covert the proposed In these
cases the private mortgage lender may be the only available source for
While a traditional lender may look to the property, the borrower and
his/her credit, a private money mortgage lender is concerned with the
appraised value. As a security, the property is producing or can produce
sufficient income to pay the note and the value of the property leaving
the issues of the borrower's credit or income as a less important factor
in providing the loan.
Speed of closing the transaction. A conventional mortgage from a
traditional source may take between 60 and 90 days to fund. Traditional
lenders need to obtain a formal appraisal of the property, perform a
detailed examination of the borrowers credit history and current
financial status, review financial statements and tax returns for both
the borrower and the property.
A private money mortgage lender can usually complete a transaction
within seven-to-10 days. As the property itself is the main criteria in
determining loan approval, there is much less examination of the
borrower and the borrower's other properties. The private mortgage
lender can generally make a decision within 24 hours of receiving
information; whereas a traditional lender may take weeks to have a loan
committee commit to the loan.
Privacy. Many borrowers may not want or be able to provide
personal financial information. They may be adverse to the hassles of
the application process associated with obtaining a traditional mortgage
loan. A divorce or business separation may necessitate keeping
financials under wrap. Current, accurate financials may not be up tp
date. While all these would negate or at least delay his getting an
conventional mortgage, it should have no effect on the borrower's
ability to obtain a private money mortgage.
Additional leverage. The borrower may want to utilize less of
his/her own capital in the property. A traditional lender will use the
lesser of the purchase price of the property or appraised value; a
private money mortgage lenders lend based on the appraised value only.
Hence the real estate investor utilizing a private money loan is not
penalized for purchasing the property at a significant discount to
At privatemoneymortgages.com, we offer all the tools to locate the right
private lender at the right price. Utilize our extensive resource lists,
informative articles and helpful hints to make the process that much