For those looking to buy a home, there are a variety of financing options available. However, depending on your finances, you might find that conventional loan terms do not fit your needs. Private home loans are another option outside of the conventional mortgage lending industry. Before you decide how to finance your home, it is important to understand the pros and cons of private home loans and whether it could fit your needs.
How Private Money Lenders Work
A private money lender typically offers loans secured by real estate, which is similar to a conventional mortgage. The difference is that these loans are often short-term loans, which can be used to purchase a property and renovate it. Then you have the option of refinancing your home or paying the balloon payment and owning it outright.
These private lenders can also be a resource for individuals looking to build a real estate business based on investments. These loans can be a viable financing option for short-term fix and flip investors, as well as investors who intend to buy the property and hold it for the long-term.
Qualifying for a Private Home Mortgage
One pro is that private home mortgage lenders are going have different terms regarding qualifying you for the loan. Mainstream lenders are required to verify your ability to repay. However, private money lenders are often underwritten in-house, which means they define the criteria for approval.
It is important to note that interest rates may not be fixed, and they may be higher than traditional loan programs. They often will focus more on your payment history instead of your credit score.
The Benefits of Working with a Private Lender
There are other pros for using a private direct lender. These include:
- Local lenders
- Fast easy closing
- Less emphases on credit scores
1st Security Mortgage is a direct lender and our team offers you benefits that can stand out from traditional mortgage lenders. They prefer to keep the loan servicing in-house, so your loan will not be sold. Plus, many hard money lenders can offer fixed interest rate options, which can be appealing if you want to have a consistent payment. Many of them can also offer a no prepayment penalty if you pay your loan off early. Finally, the fast closing option is also beneficial because private lenders are not constricted in the same way that conventional mortgage lenders.
If you are looking to make a home purchase in San Diego, either for a personal home or an investment, contact us today to determine which of our lending options can work for you.