WHY PRIVATE MONEY?
With the additional rate and costs, why would a borrower opt for hard money, rather than institutional financing? Here are the 10 most common reasons:
1. Time – Traditional lending typically takes 30 – 45 days to complete. Often, borrowers cannot wait, and thus a quick private bridge loan makes more sense.
2. Privacy – There are times when a borrower may not wish to have his/her financial information disclosed to the bank.
3. Ease – Private mortgages entail a lot less paperwork. Borrowers do not have to search for all their old taxes and asset statements.
4. Condition – Banks will take exception to properties that they consider uninhabitable. Private lenders will consider these properties, particularly for the fix and flip borrower.
5. Credit – Sometimes the credit criteria for banks is too stringent for a borrower. Since the private lender is mainly concerned with value, credit issues do not often arise.
6. Foreclosure – If the borrower is delinquent on payments, in the midst of an NOD or NOS (notice of default or sale), a private investor can help.
7. Self-Employment – Being self-employed can cause all sorts of headaches for borrowers. Often times, these borrowers cannot provide enough financial depth or credit worthiness for bank loans, and thus seek private money.
8. Short Term Answers – Trying to get a short term loan from a bank, such as a bridge loan, is not easy. Therefore if an investor is seeking a 1-3 year loan, he is sometimes better off going to a private lender.
9. Commercial Property Loan – The criteria for borrowing on a commercial property at a traditional lending institution can be strict. Having strong financials on the property is essential with banks, yet sometimes a great deal will not have enough credentials to warrant a bank loan. Private lenders think out of the box and look at value, despite some paperwork issues!
10. Non-Conforming or Oddball Properties – Some properties just don’t qualify! Say you have a residential property on a commercially zoned lot, and all you seek is 20 percent loan to value. Most lenders will just say no. Private lenders will see beyond the bank matrix for property criteria.
For more information about Private Money loans, please give us a call at 760-845-9035.
DRE# 00865708/NMLS# 305266