Private loan » Mortgage Loan

Private Mortgage Investors – Who Are They?

admin — Fri, 26 Mar 2010 07:08:42 +0000

To understand who private mortgage investors are, it is first necessary to understand what a private mortgage is. A private mortgage is a legal agreement, secured by real property, between a borrower and a private lender that obligates the borrower to pay money to the holder of the mortgage note. A private mortgage therefore produces a regular stream of income to the investor with all the advantages and protections that a mortgage lien can provide.

Typically, private mortgage investors can charge more interest and points (fees) on a mortgage than a bank could because the risk of lending to people who aren’t eligible for normal mortgages is far greater. Quite often investors lend to people with less than perfect credit, but they may also lend to real estate investors irrespective of credit.

Traditionally, private mortgage investors were individuals who had sold their property and agreed to take back a promissory note and a mortgage from the buyer. The advantages to the seller were threefold. Firstly, by offering such terms, the homeowner was more likely to sell their property in a slow market and obtain the full asking price. Secondly, the seller would be a guaranteed a regular fixed income at a better rate than could be obtained from investing in a CD. Thirdly, if the buyer defaulted, then the owner would be entitled to foreclose on the property, just as if he or she were a bank. The benefit to the buyer of a privately funded mortgage loan is that they don’t have to worry about an extensive check on their credit or financial situation.

More recently, real estate investors have branched out into other areas of real estate financing. Some private investors specialize in lending money to professional real estate investors for the purchase and rehab of residential and commercial property. Others specialize in making mortgage loans to small real estate developers for the purchase of raw land and the initial construction finance. There are even some private investors who will lend to homeowners facing foreclosure or provide second mortgage financing, similar to a Home Equity Line of Credit.

Such has been the growth in private mortgage lending that there are now companies offering private mortgage investment services in the USA. Typically, these companies will either advertise individual mortgages for “purchase” by an investor, or syndicate a hard money loan amongst a group of private investors on their mailing list, or offer shares in a private mortgage investment fund.

Lastly, but by no means least, there are private investors who specialize in buying privately held mortgages at a discount, i.e. less than the principal amount outstanding. These investors provide an important role in creating liquidity in what would otherwise be an illiquid market. The main disadvantage of being a private mortgage holder is that you must wait for the loan to be repaid before you can access your capital. If an investor can’t wait that long, then they will need to find a way of selling the mortgage to a third party and this is where this last type of private investor comes into their own.

By: Peter Haynes

Private Money For Your Mortgage Bind

admin — Sun, 21 Mar 2010 01:58:16 +0000

When you get in a financial bind, traditional home loan lenders often will not touch you with a ten foot pole. In such a situation, it is time to look for other lending sources.

Private Money For Your Mortgage Bind

Traditional home loan lenders are a rigged group. They have all types of checklist and algorithms they use to determine whether money should be provided to a borrower in a particular situation. While there are literally tens of thousands of lenders offering loans, the actual scenarios they will act on are much, much smaller. If you fall outside of these, you are going to have little if any luck getting financing. All is not lost, however.

Assume you are a homeowner who runs into a financial bind that requires borrowing against your home. Examples of such situations can include the loss of a job, sudden exposure to massive medical bills and so on. In such a situation, seeking financing from a traditional lender is going to be brutally tuff. In the case of a lost job, the home loan lender is going to balk at giving you money when you have no steady income. Indeed, this is the very reason you need the money! This catch-22 situation can lead to extreme frustration when you are sitting on equity, but can’t use it. Private money may be the answer.

Real estate is an very good investment. You know this because you own a home and watch it appreciate each year. For investors with cash on hand, real estate is considered a very lucrative opportunity. These investors will often pool their money in partnerships or corporations with the idea of creating a source of money for unique lending opportunities. When you cannot get funding from a traditional home loan lender, these investment groups represent your salvation. The salvation is known as a private money loan.

Private money loans are exactly what they sound like. A group of investors are willing to provide you with financing for tough situations that regular banks will not touch with a ten foot pole. These investment groups tend to look at your overall situation, not checklists and algorithms calculating your debt to income ratios and so on. Because of this approach, these lenders will write loans for practically any situation. In exchange for financing you when banks will not, private money loans are more expensive. You can expect higher interest rates, shorter pay back terms, higher costs and higher points than you would face with a tradition loan. When you can’t get financing anywhere else, this is simply the price you pay to hold off a foreclosure and so on.

Finding these lender can be a challenge for most borrowers. Simply put, most traditional lenders do not offer this type of financing. Call any of the lenders you see in advertisements or hear on the radio and you will come up empty. If you need private financing, your best option for locating these private lenders is to speak with a mortgage broker.

By: Sergio Haros

Stafford Loan Limits And Alternatives

admin — Sun, 07 Mar 2010 01:47:31 +0000

Subprime mortgage lending has taken a toll on the student loan industry. By association, these defaulted mortgage loan side effects have trickled down to the student loan sector. The government, in an effort to increase the amount of money available for Federal student loans, has cut back on subsidies offered to schools and lenders. This means that they will not make such an excess in profit paid for by the taxpayers and students paying high rates for their financial aid. Many lenders have pulled out of the game and others still offering student loans have increased rates, decreased benefit and tightened up approval rates.

Stafford Loans are probably the most popular of all the student loans. They are still available and are backed by the Federal Government. They have, however, reduced the amount of money available to each student. Students independent of parents can only get up to $46,000 for four years. Students that are dependants of their parents can only get up to $23,000. This may sound like a lot to some people, but you have to consider that many schools charge in upwards of $40,000 per year for tuition alone. College tuition rates historically have doubled about every four years.

Because of higher and higher tuition rates, many families have turned to community colleges and trade schools over state or private colleges. Although cheaper, parents and students are figuring out that they have a harder time getting loan money for these schools. It seems that you have to have money to make money. Better schools should produce professionals making more money, so these are the students that are being approved. It leaves many people feeling that you have to be upper class in order to send your child to school.

This is not necessarily the case. There are other types of funding out there. You may not be able to get the rates and benefits that you used to, but you can still find student loans. Private student loans are on the rise since Stafford and other federally backed student loans have decreased and become stricter on schools, lenders and families. Parents and students need to be savvy when they are shopping around.

Some people go directly to their school or bank and just accept the bad news when they are turned away or offered horrible rates and terms. This is what the internet is for! We now have a huge selection of lenders at our fingertips and can shop around in hours instead of weeks. Doing your research can really pay off. Getting the best rates and terms consists of only visiting a few sites. Remember that this is a long-term commitment and you will need to live with your decision for a very long time. Sites such as http://www.student-loans.net allow you to shop multiple lenders at once, comparing rates, terms and lending limits without ever leaving your chair. Things should get better as the market recovers, but in the meantime, do not get stuck with more than you can afford because you did not shop around for your student loans.

By: Evelyn A. Saunders