Help Me Choose Between A Mortgage Company Or Private Money Lender

Most applicants who apply for a hard money loan know they don’t qualify for, or even want a traditional mortgage. This can happen because they need fast cash or they don’t meet the necessary credit requirements. But what happens if you qualify for both options?  There are a number of benefits that come with getting a hard money loan even when you qualify for a traditional mortgage. These benefits are why so many people have started applying for the various types of hard money loans that exist. It is important to know what these benefits are before making a final decision either way.

Fast Funding Approval

One of the reasons that a lot of people are taking out hard money loans is that the whole process for getting them is much faster than with a traditional mortgage. If you want your money as quickly as possible, a hard money loan could be your best option. Many people get the funds they need through these loans in under a week, whereas a traditional bank loan could take up to a month. When you are looking into hard money lenders, you will want to find out how quickly each one can disperse your funds.

Flexible Payments & Payoffs

Private lenders offer a lot more flexibility with making payments than most banks. These lenders create customized loan plans so that the borrower can be in the best position possible for repaying theirs. If you take out a traditional loan through a bank, you will be required to agree to the terms they set. Consider a traditional mortgage company or bank lender before you get a private money loan. With a private lender, however, you will be able to negotiate a repayment plan that works well for both parties involved. The more flexible your repayment plan is, the better your chances will be of paying off the money you borrow on time.

Easier Approval 

A vast majority of banks require applicants to have good credit for them to get approved. Another one of the reasons that hard loans have become such a popular borrowing option is that private lenders don’t really care about applicants’ credit scores. If you have something like a foreclosure or bankruptcy on your credit report though, it could be a problem. Those who have bad credit and cannot get a traditional mortgage through a bank should at least consider this option.

Fewer Requirements

When you try to get a mortgage through a bank, they will take a very close look at your income history and many other things. The underwriting department will also consider things that don’t really matter to most private money lenders. They’ll look at applicable conforming loan limits and requirements that are set by Fannie Mae. One thing that really matters to a hard money lender is the potential income generated by your property. The more valuable your property is, the better your chances are of getting approved. Your lender wants to make sure they can recoup some of the invested funds if for whatever reason you miss payments or fall behind on the mortgage obligation.

No Prepayment Penalties

Those who take out a traditional mortgage through a bank will face some pretty hefty penalties if they pay off their loan early. You won’t have to worry about being charged anything extra if you pay back a hard moan loan before the due date. Those who run into some extra money and decide to pay off their hard money loan early will not have to worry about incurring any penalties or fees at all.

Things to Consider When Making Your Financing Decision

While it is true that there are a lot of benefits associated with taking out a hard money loan over a traditional mortgage, there are some drawbacks. You will almost certainly end up paying a higher interest rate and other fees. Case in point, most companies in the Hard Money List database of lenders have posted terms that are much higher than traditional banks and mortgage companies. The rate that you pay will depend on the type of loan you get, but it will likely be higher than a loan you get from a bank. It is important that you take your own financial situation into account before choosing one option over the other. Hard money loans have a lot to offer for investors, but they aren’t right for everyone.

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