Private Mortgage Lenders: A Unique and Valuable Alternative to Banks

Are you looking to invest in real estate or refinance a property you already own? Many people might think that the only option is a traditional lending institution (like a bank). Even if you have considered a credit union, you should definitely consider alternatives available to you with private mortgage lenders.

One alternative to use when investing in real estate is private hard money lenders. A private lender (also known as a hard money lender) is an investor willing to lend funds with more flexibility, and typically able to close on transactions much more quickly than traditional lenders.

One major benefit to obtaining a mortgage or money for refinancing from a private lender is that the private lender is less concerned with your credit score. They are more concerned with the asset you are interested in financing and your repayment history. Here are some more reasons why private mortgage lenders are a unique and valuable alternative to banks and how to find private mortgage lenders near you.

Less Red Tape

Banks and other traditional lenders don't want to hold onto property they acquire through foreclosure. They want to know that what they are helping people buy is going to end in a cash flow for them and not property they have to spend time and money to liquidate. That is one of the biggest reasons why they don't like to lend to real estate investors that often. It's a risky business for which they become a partner if they provide the investor with funds.

Ergo, you have to cut through a lot of proverbial red tape. It takes a long time to convince these typical lenders to give you the monetary assets you need to acquire the property or properties you want. When you go to a private lender, that red tape is slashed because a private lender is a lot like you. They are looking to invest and understand the business in which you are in.

If the deal goes wrong, they get to sell it out from under you to recoup their money. If it goes right, they get their money back and you do what you will to earn a profit on the property. The risk they take rarely negatively affects them unless the value of the property you buy is lower than what you borrowed from the private lender.

Fast Cash

Banks and other typical lenders promise “fast approval and fast cash”, but the truth is that you will probably wait a month or more. When a property has already had a few offers and is likely to slip through your fingers, the last thing you want is for a mortgage underwriter to waste valuable time. With a private mortgage lender, once you present basic information about the transaction, you’ll typically have an offer within hours, and able to close within 2 or 3 weeks.

Just be aware that some private lenders will want to see the property before providing funds (through an appraisal or BPO). If you want to shorten the time needed for a private lender to provide an offer, bring as much information about the property as you can, including recent images and/or videos of the property.

How to Find Private Mortgage Lenders

Fortunately, the alternative lending industry with regards to real estate investing has grown significantly, and there are many options. One of the best ways to find a private mortgage lender is by simply searching online. Keep in mind, however, that certain hard money lenders may specialize in certain regions, property types, or loan amounts. This is why working with a private mortgage loan broker like GoKapital will help you find the best rates and terms available.

You can also contact other real estate investors, such as yourself, to see if they have worked with other private hard money lenders. They might be a good resource for information and for telling you who lent them money to get started. Also, they will be able to describe the first-hand experience on what is needed to close quickly on a transaction with these lenders.

Reaching out to realtors is another option. Many realtors often work with private mortgage lenders, especially for clients that may not qualify with a traditional bank, so they will probably know of some private lenders as well.

Using social media is another option. It is a platform for nearly every kind of business involved, anyway. Perform searches in social media sites for the words “private+mortgage+lender” and see what pops up. Get really specific by adding your city and/or state. If these words are in any profiles on a social media site, it will pull up people who claim to be lenders. Investigate them well before making contact.

Don't forget about online lending clubs. Online lending clubs are an amazing way to find those private mortgage lenders that just don't seem to pop up anywhere else. These clubs are formed by multiple people looking to invest. Multiple lenders may offer you a deal, or some may choose to work together as a smaller lending group to assist you in your endeavors. However it works out, you are sure to find a lender or lenders from these lending companies that can provide you with the capital you seek.

Then there are friends and family. Would any of them be interested in investing in a property with you? Would they “gift” money hope to make a little profit or want to be in a limited partnership with you? It doesn't hurt to ask, especially if you think that there maybe one or two that would be willing to help you out with a downpayment on the property. You can always find another private mortgage lender for the rest of the money later.

With all of the alternative lending options available for investment properties, it is best to work with an experienced hard money loan broker like GoKapital for your financing needs.

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