Traditional home loan lenders are a rigged group. They have all types of checklist and algorithms they use to determine whether money should be provided to a borrower in a particular situation. While there are literally tens of thousands of lenders offering loans, the actual scenarios they will act on are much, much smaller. If you fall outside of these, you are going to have little if any luck getting financing. All is not lost, however.
Assume you are a homeowner who runs into a financial bind that requires borrowing against your home. Examples of such situations can include the loss of a job, sudden exposure to massive medical bills and so on. In such a situation, seeking financing from a traditional lender is going to be brutally tuff. In the case of a lost job, the home loan lender is going to balk at giving you money when you have no steady income. Indeed, this is the very reason you need the money! This catch-22 situation can lead to extreme frustration when you are sitting on equity, but can't use it. Private money may be the answer.
Real estate is an very good investment. You know this because you own a home and watch it appreciate each year. For investors with cash on hand, real estate is considered a very lucrative opportunity. These investors will often pool their money in partnerships or corporations with the idea of creating a source of money for unique lending opportunities. When you cannot get funding from a traditional home loan lender, these investment groups represent your salvation. The salvation is known as a private money loan.
Private money loans are exactly what they sound like. A group of investors are willing to provide you with financing for tough situations that regular banks will not touch with a ten foot pole. These investment groups tend to look at your overall situation, not checklists and algorithms calculating your debt to income ratios and so on. Because of this approach, these lenders will write loans for practically any situation. In exchange for financing you when banks will not, private money loans are more expensive. You can expect higher interest rates, shorter pay back terms, higher costs and higher points than you would face with a tradition loan. When you can't get financing anywhere else, this is simply the price you pay to hold off a foreclosure and so on.
Finding these lender can be a challenge for most borrowers. Simply put, most traditional lenders do not offer this type of financing. Call any of the lenders you see in advertisements or hear on the radio and you will come up empty. If you need private financing, your best option for locating these private lenders is to speak with a mortgage broker.
