Private loan » Private Investors

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

Great Lakes Student Loans Services Manage Loans for Lenders, Borrowers

admin — Mon, 08 Mar 2010 09:41:48 +0000

The student loan industry is huge, and it is expanding as college costs rise. With students looking for ways to get into college and capital holders looking for ways to safely and lucratively invest their money, Great Lakes student loans management helps unite people who want to study with people who want to invest in their education.

Great Lakes offers all the federal loans available through the Federal Family Education Loan Program. This includes Stafford loans, which offer some funding for every year a student is in school. These can be subsidized by the federal government on a need basis, meaning that until the student finishes school, the government pays the interest on the loan, allowing the student to defer payment without capitalizing the interest. Students with unsubsidized loans also have the option of paying off the loan or just the interest while they study to avoid capitalizing the interest later.

Other federal loans include PLUS loans, which are offered to parents of students in any year of college and to graduate students in addition to the Stafford loan. This loan comes with a minimal credit requirement, which can be met using a cosigner. Federal loans are offered through the FFEL as well as directly from the Department of Education, in order to enforce a standard maximum fixed interest rate, but share the burden (and opportunity) of funding student loans between the government and lenders. By managing FFEL student loans, Great Lakes makes it possible for private investors to tap into this market.

Great Lakes also offers private or non-traditional student loans, tailored to meet both the financial needs of students and the investment and security needs of lenders. These loans make it possible for students to pay the remaining costs of their education after federal loans.

Great Lakes offers a number of services for prospective students and lenders which serve to help students plan their education, help lenders increase their business, and to generally promote higher education, which, as a higher education guaranty corporation, serves Great Lakes’ interests. These resources include pamphlets and online resources outlining the benefits of receiving a college education, loan calculators for students, and loan education resources for lenders, borrowers, schools, and counselors and financial aid professionals.

For lenders and borrowers who have already established a relationship, Great Lakes has online resources for borrowers and management software for lenders. Great Lakes offers personal financial management resources for students, as well as mutually beneficial resources for helping students avoid defaulting on loans, including consolidation options.

Great Lakes student loans services help students pay for their education by providing lenders who are interested in investing in their future.

By: Adam Hefner

Bad Credit Loans and Lender Questions & Answers

admin — Fri, 26 Feb 2010 01:03:26 +0000

Q: What is a private investor and how do they differ from a hard money lender or a subprime lender?

A: A private investor is an individual who lends out their own funds to borrowers who are unable to obtain a loan from a traditional lender such as a bank. It is also possible for private investors to pool their money into a fund that lends out money on a larger scale. Private investors are often wealthy or retired individuals who want a better return on their investments than they could expect to make in the stock market or other investment vehicles.

A private investor is essentially the same thing as a hard money lender. A private lender differs from a subprime lender in that the latter still funds loan through a lending institution such as a bank, although the interest rate is higher than a traditional conforming loan.

Q: Why would a bad credit lender fund my loan when traditional banks would not?

A: Hard money lenders, sub prime and bad credit lenders are often referred to as “high risk lenders.” These lenders have a unique understanding of specific types of real estate situations and markets. As long as the lending situation fits into the lenders comfort zone, they will usually make the loan. It isn’t that a bad credit lender gravitates towards overly risky loans or situations. Rather, there are additional safeguards in place for a bad credit lender. Namely, a borrower must have a 20% or higher equity stake in a property to qualify for a bad credit loan — the loan is therefore secured by a larger property ownership portion than many traditional loans.

In addition, the bad credit lender receives a higher rate of return than a bank would with a traditional conforming loan. The greater the risk for the lender, the higher the interest rate for the borrower. If one or more traditional lending institutions deny a borrower’s loan because of credit problems or a small level of liquid assets to use as collateral, a borrower will need to apply with a subprime, hard money or bad credit lender.

Q: If I qualify for a hard money loan, is there a way to eventually work into a normal loan?

A: Of course. A bad credit loan should be a short term loan – anywhere from several months to 2 years. After a borrower has spent a year or 18 months paying off their private loan, our mortgage team will try to transition you into a subprime or alt A loan. Hopefully, this is enough time to rebuild your credit and get on a more stable footing financially.

Q: What kind of financial documentation does a borrower have to show to qualify for a bad credit loan?

A: While the type of documentation needed to secure a loan will vary from lender to lender, most require either bank statements or income tax returns. The lender will usually need to see an appraisal of the property, as well as the title to make sure that the borrower is indeed the owner and to see if there are any existing liens or legal issues with the property in question. Each bad credit lender will analyze the necessary documents and then decide whether to provide the loan.

Q: What if I have damaged or bad credit as well as a low FICO score?

A: The majority of bad credit borrowers apply for a bad credit loan due to damaged credit along with a lower than normal FICO score The whole point of hard money or private loans is to provide a loan to an individual with past, recent, or current credit issues so they can rebuild their credit and eventually refinance to a more traditional type loan.

Q: What is my FICO score and how can I find out what mine is?

A: A FICO score is a basic credit score that estimates the creditworthiness of a borrower and is used by financial institutions to determine credit limits and interest rates. FICO scores are held by the three major U.S. credit agencies (Equifax, Experian and Trans Union) and all vary slightly depending on the formula used to generate the score.

FICO scores range from about 300 to 850. A score above 720 is considered to be “good credit,” while a score below 600 is considered to be fair to poor. Conforming lenders want to see a credit score of usually 640 and higher. High risk lenders will look at credit scores as low as 500, as long as the borrower has 25% or higher equity in a property for collateral.

Q: How do I Apply for a Bad Credit Loan?

A: Do a search on the internet for “bad credit loans” or “bad credit lenders” and will find different bad credit lenders that offer bad credit loans in various states. Then either call them and explain your situation to them or fill out their short online application to be considered for a hard money loan. Be sure to read the language of the loan documentation carefully to protect your self from predatory lending.

By: Corey Senn

Stop House Foreclosure With A Private Loan

admin — Tue, 15 Dec 2009 08:10:28 +0000

Foreclosure is becoming one of the most frequently used words today with such a tough economy and turbulent times. Unfortunately people across America are losing their homes by the thousands on a daily basis. Whether you’re one who is losing your home, or you’re looking to capitalize on the ever-increasing foreclosure market this article is good for you.

If you’re an investor you may be able to help out many people who are losing their homes to foreclosure. You might consider taking on some partners and buying up a few good foreclosure homes that are on the market at drastically reduce prices. You could possibly help out somebody by buying a home, and then renting it back out to the person who is losing their home to foreclosure by offering them a lower payment.

If you’re the one that is actually losing your home to a foreclosure situation then you may want to contact the private investor yourself. This is something that you could instigate as well by contacting private lenders to see if you could work out an agreement where they would purchase the home and then you would still be able to stay in your home. This can potentially save you thousands of dollars as well as avoid the emotional trauma by not having to uproot your family and move out of the neighborhood.

These are just a few simple ways to stop house foreclosure, before it’s too late. If you’re not sure where to start you can often contact your bank or lending institution where you originally got your home loan and they may have a list of private investors that are willing to talk to you in order to stop home foreclosure. You need to understand that your bank or lender is your friend and they would love to help you resolve the issue. Contrary to popular belief they don’t want to go to the pain of foreclosing on your home.

By: Tom Turner

Private – Hard Money Loans For Commercial Properties

admin — Wed, 09 Dec 2009 08:20:07 +0000

Private money commercial loans can be a very smart way to finance a commercial property in today’s challenging market. It used to be private money commercial loans were primarily for borrowers with credit issues. Times have changed. Today, private money commercial loans are being utilized by many different types of borrowers.

Private money commercial loans are often used for properties that a more traditional lender would not lend on. let me talk about a property I recently got funded, and you will see how this hard money commercial loan was perfect for this situation. The borrower bought a beautiful 3 story commercial building from a company that went bankrupt. When they bought the building, the building was vacant. Now, the building needs to be improved to handle multiple tenants. As there were no tenants, no bank would even look at this loan. However, with my private investors, they realized that if the building were occupied, the income would be more than sufficient to handle debt payments, and to pay back the borrowers a nice return. My investors funded this loan in 25 days. This is a perfect example of why to use a hard money commercial loan.

Private money financing for a commercial property is normally easier that a traditional bank loan. Of utmost importance is the fact that the investor simply wants to make sure they are paid their money. To that end, a hard money lender requires that the Borrower have plenty of equity. For instance, lets says a Borrower owns a small 12 unit strip mall, has a 585 credit score, needs a loan of $500,000, and the property is valued at $2,000,000. This Borrower will not find it easy securing financing with a local bank or traditional mortgage source.

Due to the low loan-to-vale ratio of this loan, 25%, I have private investors who are eager to lend on this situation.

Keep this in mind, when looking for a private money loan, the loan to value ratio will always be lower than a traditional commercial mortgage. Normally, and depending on credit and how the property “cash flows”, and the Borrowers capacity to re-pay the loan(income), the maximum loan to value is 70%. In a traditional commercial mortgage, the maximum is 90%.

A private money loan is not cheap, expect to pay 3-7 points, and a rate of 9-15%. In the end, rates and fees are dependent on the risk of the transaction. In general, the roskier the loan, the higher the interest rate.

By: Donald Glen Timms