If you’re in the market for a new property, you may be wondering whether you should seek out private money for financing. After all, private mortgages often come with higher interest rates than traditional loans from banks and other lenders. However, there are several good reasons why private money may be the right choice for you. In this post, we’ll explore one of the key reasons why people choose private money: property condition, location, and/or zoning.
When you apply for a traditional mortgage, the condition and zoning of the property you’re interested in can have a big impact on whether you’re approved for a loan. In fact, these factors typically account for around 50% of the lender’s decision-making process. Why? Because the lender is going to secure their money against that property. If the property is run down, in a less-than-ideal location, or has zoning that doesn’t meet the lender’s guidelines, it may be difficult to get approved for a traditional mortgage.
This is where private money comes in. If you’re interested in a property that doesn’t meet traditional lending criteria, you may be able to secure financing through a private mortgage lender. Private lenders are often more willing to overlook property condition, location, and zoning issues, as they’re primarily interested in the value of the property and your ability to pay back the loan.
Of course, there are some downsides to using private money. As we mentioned earlier, interest rates are typically higher than traditional loans. You may also be required to put down a larger down payment or provide other forms of collateral to secure the loan.
So, why would someone choose private money over a traditional mortgage, despite these drawbacks? In addition to property condition, location, and zoning issues, there are several other reasons why private money can be an attractive option. For example, if you have poor credit or a high debt-to-income ratio, traditional lenders may be unwilling to work with you. Private lenders, on the other hand, may be more willing to take on borrowers with less-than-perfect credit.
Additionally, private money lenders can often move faster than traditional lenders, which is important if you’re in a time-sensitive situation. If you need to close on a property quickly, a private mortgage lender may be able to provide the financing you need in a shorter amount of time than a bank or other traditional lender.
Conclusion
While private money may not be the right choice for everyone, it can be a good option if you’re interested in a property that doesn’t meet traditional lending criteria. Whether you’re dealing with property condition, location, or zoning issues, a private mortgage lender may be able to help you secure the financing you need to make your real estate dreams a reality. Just be sure to carefully weigh the costs and benefits of using private money before you make a decision.
