So, you’re looking at a house on the market, and it is everything you wanted in a home. When it comes down to financing, did you know you have more of a choice than going through a bank and choosing a conventional, VA, or FHA mortgage loan? You can utilize the services of a private lender to obtain your home loan. Here are some reasons going to the private sector is a good idea for many people.
What is a private lender?
A private mortgage lender is simply a lender that has no direct relation to a bank. Your private lender may come in the form of a friend, family member, or business. There will still be paperwork, documentation, and other agreements to get your funding. But there is usually no underwriter involved, and your credit score may or may not be an issue for a private lender. Some lenders have a minimum credit score they will work with, and some rely on your stability as verified through your job and residence.
Who should use a private lender?
Anyone that wants a home loan should explore this option. The rates may be higher in some cases than a traditional mortgage. In cases where your credit is keeping you from qualifying for a home loan, or the housing is a type the bank considers too risky to finance such as a tiny house or mobile home, utilizing a private lender may be your ticket to owning a home of your own.
Is there still a lot of paperwork?
Private lender loan tends to not have as much paperwork, but there is still documentation needed. This is designed to protect the potential homeowner and the private lender in the lending agreement. The paperwork isn’t there solely for an underwriter to base a lending decision on. Mainly the aspects of the lending relationship will be spelled out in no uncertain terms, including prepayments if allowed, loan maturity dates, and settlement options in the case a homeowner passes away during the term of the loan.
Will the home need insurance?
Your home will need to carry full insurance during the course of the loan exactly like a traditional mortgage loan. There are two ways this normally works. The first way is the private lender will write the insurance coverage into the loan and incorporate the monthly premium as part of your mortgage payment. The other common way is you need to find verifiable insurance coverage that is ready at the time of funding. If you are unsure, talk to your lender to see what avenues they prefer for insurance options.
Can you close fast?
A private lender can get your deal done from start to finish in as little as 14 days. Fast funding is one of the many perks of using this type of funding. Because of the streamlined documentation and no underwriter asking for “one more thing,” the process from application to funding can go rapidly. This is where utilizing a private home loan really trumps getting a traditional mortgage.
Using a private lender for a home loan isn’t for everyone. If you have struggled with credit issues, had a previous foreclosure, or cannot otherwise qualify for a traditional mortgage loan, this may be the answer you’ve been looking for.
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