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How to obtain a private money mortgage....

Private 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 funds.

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 market value.

At, 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 easier.



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