Is your credit score poor? Are you constantly getting your mortgage application rejected by traditional lenders? Don't worry, a private mortgage is the perfect solution for you. Similar to a subprime loan, a private mortgage is a type of loan that is offered by private lending institutions or lenders to prospective homebuyers who, as mentioned above struggle to secure a loan from a traditional lender like a bank, or credit union etc. If you are a homebuyer and your credit history is not the greatest, there is no need to panic. A private mortgage lender looks at lending the loan as an investment, and they are not so hell-bent on an individual's credit history and background checks. This type of mortgage also makes sense if you are buying a property that is unique, or you don't plan on owning the house for a long time, or you have a source of income that is non-traditional. Private mortgage loans are short-term, where the amortization period typically lasts anywhere between six months to three years. If the borrower makes the private mortgage loan payments on time, they are likely to be in a much better position to get their mortgage application approved by a traditional lender. Unlike traditional lenders, interest rates offered by private mortgage lenders are usually on the higher side. This is due to the fact that payments one makes on these loans are interest-only. Additionally, it is easier to secure a private mortgage than to qualify for a traditional mortgage. But you must be aware that those perks come with higher interest rates, fees, and more risk.
How does one qualify for a private mortgage?After filling out the mortgage application, it usually takes less than a day to get your mortgage approved. As long as you provide the private mortgage lender with all the necessary information, the approval process will be instantaneous. In certain cases, you will be required to wait for 48 hours. It is only in rare circumstances that it takes a long period to get approved for a loan. With respect to fees, there is only a minimal amount that you are required to pay when working with a private mortgage lender. You can expect to pay around 2% or a little more based on the risks involved. The loan amount is another factor which determines the fees. To significantly increase your chances of getting your private mortgage loan approved quickly, ensure the home you are buying is in good condition and has great value. The location of the property, including the type, are some factors that private mortgage lenders usually look into. If there is less risk involved, the chances of your application being renewed are most likely. Unlike a traditional mortgage, you don't have to prove to a private mortgage lender your ability to pay back the mortgage. There is no need to show proof of fixed income. As long as you are able to provide proof that you are earning money, there shouldn't be a problem.
Who is the ideal candidate for a private mortgage?While the interest rates and fees of a private mortgage are much higher when compared to a traditional mortgage, this type of mortgage is suitable for individuals:
- Whose credit history is not the greatest, and traditional lenders will not approve their mortgage application, as they do not have enough funds to purchase the property.
- Who requires funds immediately but does have the time and patience to go through the lender's approval process.
- Who are looking to purchase unconventional property, so it is highly unlikely for a traditional lender to approve financing. Maybe, you have inherited a property that needs work to be done; you require help with construction costs or are looking to purchase vacant land or commercial property.
- Who needs a short-term loan until they find themselves in a better position to secure funding from a traditional lender.
- Who are not able to confirm their income to meet the necessary requirements for a traditional mortgage.
- Who are new to the country and cannot meet the standards of traditional lenders. An individual's foreign income or credit history from a different country might make it hard to get their mortgage application approved by a traditional lender.
- Whose income is irregular because they are self-employed.
- Whose income source cannot be confirmed. Small business owners usually find it difficult to get their mortgage requests approved by banks.