Getting a Mortgage: Characteristics of Private Mortgage Lenders

Countless lenders offer the best mortgage rates. Consulting with traditional lenders will give you the best deals as long as you search for them properly. However, some clients can only deal with private mortgage lenders. People consulting private mortgage lenders must know the difference between these lenders and traditional lenders through an array of characteristics.

Fund Sources

Some loan amounts are funded by the government or other organizations. However, the number of entities behind the funding causes these lenders to stall the approval process or ask numerous requirements to borrowers.

Private mortgage lenders fund loans through their own private funding. This means they have their own money to provide loans the faster time possible. Private lenders pool their money differently, ensuring that funds will be available in the process. Some individual lenders have their own funds that allow them to provide loan to gain something like profit or others. Other companies have groups of individuals pooling funds that let them fund multiple loans.

Term Availability

Private mortgage lenders stand out among other traditional lenders with their offered loan terms. Traditional loan types usually offer 15 to 30 year mortgage terms. Some borrowers don’t want to spend all this time paying their mortgage. They prefer something shorter to ensure the house is already theirs after a shorter period of time.

People consulting mortgage brokers Phoenix AZ with this loan need typically point them towards private mortgage lenders. Typical loan terms range from one to 35 years, which means people looking for shorter mortgage terms will find the most flexible term possible with these lenders.

Interest Rates

Borrowers want to save money on interest rates on their mortgages. People who want to save money are recommended to avoid private mortgage lenders. These lenders charge 10 up to 18 percent interest rates, the highest interest rates offered in the market. However, people who don’t have the choice can run to private lenders for their loans. They are still the best resorts for those who can’t get traditional funding for their mortgages.

Loan Processing Fees

Just like traditional mortgages, private lenders charge an array of fees. Combining all fees included in the process can comprise around 1 to 3 percent of total loan amount. Some buyers won’t find these fees as helpful, which is also one of the reason why these lenders are the last resort for borrowers. Buyers, however, can still ask if some fees are negotiable to save some money.

A person who can’t get VA, conventional or FHA mortgages can consider private mortgage lenders. However, they have unique characteristics that set them apart from traditional lenders. Be sure to know these characteristics to set your expectation in getting this loan. Find out their deals and compare prices first among private lenders to save more money.