Most homebuyers will not have the funds to buy their home with cash, which means they will need to apply for a mortgage loan. To qualify for a mortgage, lenders will look at your credit score and history to assess your level of creditworthiness. A borrower’s income is also very important so what if your income is not conventional, what if there is a cash component or what if you write down your income to save taxes? So, what do you do if you can’t get approved for a mortgage with traditional lenders? This is where private mortgages come in, and our Mississauga mortgage brokers are here to explain the benefits of using private mortgage lenders.
What is a Private Mortgage?
Rather than being financed by a bank, lender, or credit union, a private mortgage can be funded by a non-traditional source, such as by family, a business, a friend, or a hard money lender. It gives those who are struggling to get approved for a traditional mortgage an alternative means of getting a loan.
What Are the Benefits of a Private Mortgage?
They Are Easier to Qualify For
When you are applying for a traditional mortgage, you need to provide documentation that shows what your financial situation is like. You may be able to cover your monthly finances with no issues, however, if your credit score and history aren’t meeting the criteria that a lender has set up, you can still be turned down for a loan. When you apply for a mortgage through a private source, you have less strict criteria to meet.
You Build a Relationship
Using a private lender, such as a hard money lender, helps create a foundation for a business relationship. This can make it easier if you need to borrow money from them again. Honouring the mortgage loan will build trust.
You Have Less Red Tape to Deal With
As a private investor who may buy properties to fix and sell, you’ll know how fast a real estate deal can happen. Using a traditional mortgage lender can take some time, causing you to lose out on that deal. When you are using a private mortgage lender you have less of the red tape involved, which makes the process a lot quicker.
It Can Be a Good Option for New Homebuyers
If you don’t have a long credit history and are trying to buy your first home, using a private mortgage lender can be quite helpful. The same goes for new investors who are trying to build up their real estate portfolios. A private lender is more flexible and more willing to take on the risk of lending to a new investor or homebuyer.
A Much Quicker and Easier Application Process
As mentioned earlier, the traditional loan process can take some time to get through. You have to have someone go through all of your financial history and records, and can end up going back and forth to obtain any extra documentation that is needed. All of this goes back and forth between the underwriter, lender, and broker. A private lender doesn’t need to deal with the regulations a traditional bank would. Less paperwork means a quicker approval process.
Smaller Down Payments
When there are credit issues or income proof issues, a traditional bank lender will expect a down payment of 20% or even 35%. Private lenders can lend the same type of borrower but with down payments of 15% and in some special cases with only 10% down.
If you have questions about what mortgage options are available to you, give our Mississauga mortgage brokers a call today!
