How Do Private Mortgage (Hard Money) Lenders Differ?

You may think that all private mortgage (hard money) lenders are the same, but they as similar as comparing one restaurant to another.  

There are two primary factors that make private mortgage lenders different from one another.  The first difference is the types of loans they arrange and the second is whether they are a direct lender or a mortgage broker.  Some private lenders only lend on residential properties, where some lend on all types of properties, including apartments, office buildings, land, mixed-use, and other property types.  

The secondary reasons that differentiate private mortgage lenders are their funding and capital capabilities.   Are they a direct lender or a mortgage broker?   It is important to know where the actual funds are coming from and can the lender or broker fulfill their loan commitment and actually fund the loan.     Some private mortgage lenders have their own funds and or may manage a mortgage pool.  Other private lenders may only be brokers, which is not always bad, and will need to locate the lending source outside their office and internal capital resources.   

GW Private Capital arranges every loan with its own capital or with the funds from friends, family, and small boutique mortgage funds.

Another way in which private mortgage lenders are different is the minimum loan amounts they arrange.  Most private mortgage lenders have a minimum loan size, this may be $100,000 or it may be $250,000, this is set by each individual lender.   Every private mortgage lender usually has a maximum loan that they will arrange, $500,000 or $10,000,000.  Each lender will establish their own maximum limits.  

GW Private Capital, Inc. arranges loans as small as $30,000.  

Private mortgage lenders also differ in the lien position that they arrange.  Some only arrange 1st position mortgages, where some may arrange both 1st and 2nd mortgages.  

GW Private Capital Inc. arranges 1st and 2nd mortgages and in rare instances will also arrange 3rd position loans.

Not all private mortgage lenders arrange loans in all 50 US States, most lend only in one state or just a few.  Furthermore, many private lenders only lend in regions within a particular state. Some lenders may be licensed to lend in the entire State of California but may only lend in the Southern or Northern areas within the state.  Most private mortgage lenders will also only lend in certain counties and cities that they are comfortable lending within.  The majority of private lenders will only lend in major cities with higher populations and may stay out of areas that are in outlier areas, or rural communities.

Private mortgage lenders also differ based on the types of loans they arrange, consumer versus non-consumer loans.    Most private mortgage lenders will only arrange loans where the funds are for business or investment purposes.  Also, most private mortgage lenders will not lend on properties that are owner-occupied or where the purpose of the funds are being used for a consumer purpose.  A consumer purpose is where the funds will be used for their personal use, such as to buy a home to be their primary dwelling.  A consumer purpose could also be paying a credit card, paying an automobile loan, paying a student loan or to paying for a wedding.   

The reason that most private mortgage lenders do not arrange consumer purpose loans is because of the legal compliance requirements for arranging consumer loans is much more stringent and tightly regulated than for arranging non-consumer purpose loans.  All private mortgage lenders who wish to arrange consumer purpose loans are required to have additional licenses and comply with all state and federal lending laws and guidelines.     Most private lenders do not want to have to meet these requirements and subject themselves to the possibility of being penalized for violating these laws.  

After the recent mortgage and real estate market crash of 2009, all states and federal agencies created new and strict lending laws that were designed to protect consumers.  With the passing of these laws, they restricted the supply of private mortgages.  The regulations and laws that private mortgage lenders must now comply with are arduous and difficult.  Most private mortgage lenders have decided to not lend on owner-occupied properties and do not arrange consumer loans.  Most will only arrange loans for rentals and non-owner occupied and commercial properties.    

GW Private Capital, Inc does arrange consumer purpose loans, however, on a case-by-case basis.  We will arrange loans on owner-occupied properties where the purpose of the loan proceeds will be used for business, investment or a non-consumer purpose.  

Most private mortgage lenders will arrange purchase loans and refinances.  What makes each private mortgage lender different is their own unique lending guidelines and requirements.  Some private lenders may require a minimum borrower credit score and some may not care if a borrower has poor credit.  One private mortgage lender may be an expert at arranging loans for fix and flip investments, and will only require a small down payment from the buyer, investor.  Understanding these important differences is what make each private mortgage lender unique and different from the next.  

To learn more about Private Hard Money Loans, please contact Jay Green at
(714) 747-1912 or email him at

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