At the beginning of 2019, over 64% of Americans owned their own homes. If you want to join them, you’ll need to take out a loan.
However, with so many types of loans to choose from, it can be difficult to know which you should go with. Banks offer some benefits but have high qualifications that the average person don’t meet.
Fortunately, there are other options for people borrowing any amount of money no matter what their credit score is. Keep reading to learn more about private money lenders and how one can help you get into your dream home today.
What is a Private Money Lender?
A private money lender is any non-bank company or individual that lends money to people to buy real estate properties. Many private money companies also offer hard money loans which are designed for short-term expenses.
Benefits of Using Private Money Lenders
Let’s jump into a few of the reasons why you might want to use a private money lender to purchase a home.
Streamlined Process
Traditional bank loans require you to sign mountains of paperwork before you can get approved for a loan. This tedious process can be frustrating, boring, and time-consuming.
Private money lenders require only a few signatures which makes the entire process far more enjoyable and quick. That means you’ll spend less time at the lender’s office so you can start packing to move sooner.
Faster Transaction
The total time you’ll spend waiting on approval is also significantly reduced when using private lenders which is one of the primary reasons many house flippers use their services.
If you’ve stumbled on a great deal on your dream home, you may not have two weeks to wait for your money. Private money lenders will get your money to you within days or even hours so you can buy your home sooner.
No Hidden Fees
Banks make a lot of their money thanks to charging various fees, many of which are hidden so you don’t find out about them unless you read all the fine print or suddenly get charged with one.
With private money lenders, you don’t have to worry about hidden fees because they simply don’t have them. Everything is laid out clearly so you know exactly how much you can expect to pay.
Flexible Terms
Private money lenders are all about building relationships with people. They understand that everybody has a different situation and offer flexible terms to borrowers. Banks, on the other hand, typically offer only a couple of options.
One of the options that many private home lenders offer is to allow you to use various assets as collateral. If you have anything of value, then, you can offer this to help improve your loan terms.
Less Documentation
If you’ve already tried to apply for a bank loan, you know how much documentation you’re expected to provide before they’ll even consider offering you a loan.
To avoid tracking down every piece of paper that shows a financial transaction you made over the last six months, consider a private home loan instead. These often only require proof of income or collateral.
This is another way that makes the process significantly faster than a bank loan because you won’t need to spend your time gathering all of this extra documentation.
It’s far less invasive as well since a private lender won’t need as much personal financial information.
How to Get a Private Lender Home Loan
Now that you understand the benefits, let’s look at the steps needed to secure a private money loan so you can buy your home as soon as possible.
1. Do Your Research
The first and most important part of the process is for you to do your research. Just as bank loans aren’t for everyone, neither are private home loans. Before you do anything else, you need to make sure it’s going to work for you.
Figure out how much you can afford to pay on a monthly basis and use that to determine the size of the loan you’re going to need. That will help you understand what loan terms will be best for your situation.
You’ll also want to check out several local lenders before making your final decision. Ask for recommendations or check online reviews to make sure you’re working with a company that has high standards.
2. Contact the Lender
Once you find the best lender for your situation and know what terms you’d like to propose, contact the company. Be prepared to discuss your finances with the lender as you negotiate.
As you negotiate, you’ll want to be flexible. Remember that whether you’re working with a business or an individual, they’re taking a risk by lending you money and need to make sure they’re protected.
However, you’ll also want to be firm with your own terms and careful not to accept a deal that you won’t be able to uphold. For example, if the monthly payments are higher than what you think you can afford, keep negotiating.
If you can’t seem to come to an agreement about loan terms, you may need to save up some additional money for a larger down payment before you can get the perfect private loan for you.
3. Sign the Paperwork
Once you have everything squared away, there’s nothing left to do but sign the paperwork. As previously mentioned, this paperwork will be far less than what you can expect to get with a traditional bank.
Before you sign, you’ll want to take a few minutes to read over everything to ensure it’s in order. This is particularly true if you’re working with a new company or one you couldn’t find a lot of reviews on.
Ready to Apply for Your Private Home Loan?
Now you have everything you need to know about private money lenders and how to get a loan through one. As you can see, there are numerous benefits that can help you get into your dream home quickly.
If you’re ready to apply for a private home loan, call us today. We would love to help you understand your options and help get you the money you need as soon as possible.