Private mortgage lenders are often seen as creepy middlemen that you should avoid if you want to get a mortgage. Unfortunately, this reputation is usually based on outdated myths and misunderstandings. This article aims to set the record straight and help you understand how private lenders can help you find the home loan you need.
Without further ado, here are 5 myths about private mortgage lenders that you shouldn’t believe.
1. You Need To Have a High Credit Score To Qualify
Many people turn to private lenders when traditional lenders such as banks and credit unions refuse to approve their loan applications. This is because private lenders offer different funding choices that loan applicants are unable to get elsewhere. Flexible lending alternatives created exclusively for loan applicants with bad credit are among these.
This is especially true for community-oriented lenders that offer to sit down with their applicants with bad credit and listen to them, as opposed to banks and organizations who are intolerant of borrowers who do not conform to their rigid and inflexible requirements. Borrowers may have difficulty getting authorized by banks since their finances do not meet these standards, in addition to having a low credit score. Private lenders who are community-oriented and open-minded are a better financing alternative for lower-income clients since they have expertise in creating more sustainable loans.
2. They Are Risky
When you read the word “risky” in connection with a financial product, it is natural to assume that this product is not safe. Unfortunately, this word has a much more negative connotation than the term “risk”, which is a much more neutral word.
The truth is that all financial products have some level of risk, and private mortgage lenders are no exception. However, it is important to understand what level of risk you may be taking on by choosing private mortgage lenders over conventional lenders. In most cases, the risk is much lower.
3. They Are Not Honest
Reputed private lenders would not be in business if they were simply planning debt traps or using deceptive tactics. Private lenders rely heavily on referrals and word of mouth to maintain their good reputation. They have a lower failure rate than large banks with billions of dollars at their disposal.
Unlike high-paid bank executives, alternative mortgage lenders owners and administrators are invested in the business, and their lives are majorly tied to their company’s success, which is in turn tied to the success of the loan applicants. Applicants can avoid loan sharks if they stick to lenders with high recommendations and those active in charity or who have been in business for quite some time.
4. It Takes Longer To Approve Your Mortgage
Banks often have a demanding and time-consuming application process for mortgage loan borrowers. This is not only time-consuming but also stressful. Private mortgage lenders, on the other hand, do not adhere to tight standards and thereby avoid dealing with red tape. This basically means that obtaining a mortgage from a private money lender is much faster than obtaining a typical mortgage loan.
5. Private Mortgage Lenders Are Not Ideal For Beginners
A private lender’s mortgage loan is an excellent place to start for first-time borrowers. We all start somewhere, and the mortgage loans offered through private lending will enable you to begin your life and make these vital purchases and investments because they do not place a high value on your income.
Private mortgage lenders are a great option for those who are looking for a loan but don’t have the best credit. While conventional lenders may not be an option, private lenders are more likely to provide financing to those who may have been declined from a traditional lender.
When choosing a private lender, make sure you do your research and find a lender that fits your needs. Even better, work with a reputable mortgage broker who can recommend the lender that works best with you.