Private Mortgage Lending Criteria
Private mortgage lenders will qualify and approve applications for financing slightly different from a traditional institutional lender.
First of all, someone seeking a private mortgage for either residential or commercial purposes has likely been unsuccessful securing mortgage financing with an institutional lender. While a private lender’s application process will be much more streamlined than a traditional mortgage lender, they still are going to want to know what the money will be used for and the circumstances that lead to the need for financing.
Few lenders, including privates, are interested in high maintenance borrowers, so the back ground story of the applicant will be brought into consideration.
Second, the resale potential of the property as well as the property value are equally important to a private lender. If there is good equity available to secure a private mortgage, but the resale market in the area is thin and hard to predict in terms of timing and net realizable value after sale, then a private lending source may still pass on the deal.
Third, while an individual credit score or credit profile is not always scrutinized or even looked at by privates, there are a number of private lenders who will take a look at your credit background to determine if you’re someone perhaps struggling with their cash flow, or someone who habitually doesn’t pay their bills and is constantly in arrears.
Once again, private lenders are looking for borrowers whose intention is to pay their bills on time and honor the conditions of the mortgage. Even applications with strong property values may still have a hard time securing private financing if there are indications that the potential borrower may not have the best intentions towards managing his or her financial commitments.
That being said, there are private lenders that will still finance people with really bad credit histories provided that the property values and the resale market supports the lending decision. These mortgages will also be granted at higher rates with higher closing fees, and any failure to make payments will be dealt with swiftly to the full legal rights of the mortgage provider.
Private lenders typically will also want to inspect the property themselves and may also conduct their own appraisal of market value.
Most private lenders work through mortgage brokers to access the market with each lender typically being very regional in terms of properties they will consider financing. Part of the reason for a small nearby market area is the development of first hand knowledge of the market and property values.
If you are trying to locate or secure a private mortgage, I recommend that you give me a call so I quickly assess your options and go over them with you to determine the best course of action.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel