In real estate, there are several types of mortgage loans available. The most common mortgages are traditional real estate loans offered by banks, savings and loans and mortgages lenders. Traditional mortgages have the lowest interest rates and the lowest loan charges, however, the qualification requirements are fairly stringent and every borrower must meet the minimum credit, income and documentation requirements.
For many borrowers, such as the self-employed, those with less than perfect credit or those who cannot meet the qualification requirements of traditional mortgages, there are alternative mortgage options. One option is private hard money. Private money are mortgages that have higher interest rates and high loan costs, but are much easier to obtain. Most private money loans are equity-based, that means the loans are secured primarily by real estate and not by the credit or income of the borrower.
Private money loans serve thousands of borrowers who may never have access to mortgage loans and real estate credit.
What Are Private Loans For Real Estate Used for?
Private money mortgages can be used for the same purposes traditional mortgages may be used for, purchasing real estate, refinancing, investing, construction, development, purchasing fix and flip loans and all other purposes where traditional mortgages may be used. Private money loans can also be used to buy.
Is There a Difference Between Private Money Loans and Hard Money Loans?
The main difference between private money loans and hard money loans is in the qualification criteria. There are few similarities between how hard money lenders and conventional lenders handle loans. For instance, just like conventional lenders, hard money lenders usually have predefined criteria for the type of borrower they will approve. On the other hand, with a private money loan, the requirements for qualification are worked out differently for each unique case.
Benefits of Using Private Money Loans
There are several benefits that a borrower will get if they choose a private money loan. One of the most significant advantages is that there is a great deal of flexibility when it comes to the approval criteria in private lending. Usually, the investor or lender will be willing to work with borrowers who have failed to obtain money the conventional way.
For instance, if you have a low credit score and you can’t qualify for a bank loan, a private lender might consider or even approve your loan. These lenders also work with people who have a good amount of real estate experience, even if they don’t have collateral.
While there are several types of loans out there, it’s worth considering private money loans when it comes to real estate. From having different qualification criteria to the flexibility involved, you will want to consult with a private lender right away to reap the benefits.