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Wednesday, 2 October 2013

Mortgage Brokers 1: Are you familiar with Private Mortgages?

Wow, how hard can it be to broker a private mortgage, how much and hard do I have to work on a file like that; I have a borrower did not fit last week at the bank, but I know a couple of private lenders, just throw it at them and it will be just dandy to collect a nice fee, for doing nothing. Well, hold your horses, cowboy, I have got news for you. It is not that simple. Private individuals are more careful and more picky than the banks are. Banks set guidelines and they have their employees follow them, I mean Underwriters... Of course private do not have a stringent lending criteria and overlook bad credit, even some can be talked into not so hot location, however the property has to be appealing to them. With private lenders, nothing carved in stone, besides they are charging fees and high rate all adjusted to the risk factors like:

1.       Clients credit, what is in reality not a disqualifying factor, but sends rate higher as bad credit is indication of, you are a risky borrower
2.       Job situation also not the main priority in make a decision for private lender, but certainly can play to set interest rate higher or lower
3.       Property location is important as some markets are just slow, making property to be sold in case of foreclosure a long time, thus biting into equity
4.       Property curb appeal and marketability, like older less appealing properties are harder to sell
5.       LTV is very important, higher it is, higher the fees and the rates are, adjusted to the degree of risk again….

As you can see, there is no free ride for any of your borrower, however there is a chance to get funded if there is a strategy to maintain mortgage current at all times and coupled with a strategy to exit the mortgage by refinancing and or other means.

I will write about private mortgages and as a private lender myself, will give you more insights into how investors think and what makes them to go to your direction, it is more complicated, but manageable and your commission will be generous.