Why should borrowers choose private lenders over traditional banks? The short answer is that these lenders fill in the gaps where other lenders fail. Many individuals today have the ability and desire to invest in a new home, but they have an unproven track record.
Take, for example, the average millennial who is just now thinking about buying a first home at the age of 30-something, with limited credit and student loans. A typical bank may turn down these borrowers for the best possible options, but hard money lenders offer opportunities.
Versatility Is a Key Reason to Trust Hard Money Lenders
Perhaps one of the most important reasons to turn to private lenders is their unique ability to provide flexible, versatile funding for virtually any need. Whereas a traditional lender may need pages and pages of documentation and proof of a projectâ€™s viability, this is not necessarily the case with some private lenders. They have the means and the dedication to help consumers of all types to secure the type of financing they desire.
This includes construction loans to build expansive projects. It includes bridge loans that are typically hard to get otherwise but fill in the gap between projects and financing. Commercial loans are even more complex to todayâ€™s average buyer. Starting a business with a new loan for a building can seem out of reach and limiting. Itâ€™s hard to create a structure and build a business without access to necessary funding. Private mortgage lenders fill this gap, too.
Perhaps one of the most important reasons to turn to these lenders over others has to do with rehabs. Rehabs are the diamond-in-the-rough type of structure that has good bones but very little value at any given point. In some situations, they can become stunning new homes or commercial properties, but to make that possible, thereâ€™s the need to access the proper funding. Traditional banks tend to see just the â€œroughâ€ and lack enough focus on the â€œdiamondâ€ to ensure rehabbers get the funds they need to transform these spaces.
Owner-occupied loans are another key area. Expanding a property can seem difficult in some situations. Banks typically have various federal and state regulations that must be met before they can lend. This complicates the process and slows it down. Private mortgage lenders free up that space considerably.
Private Lenders Provide Opportunities
Itâ€™s important to know that hard money lenders do not just give away findings and cash on hand. They still need documentation and proof of creditworthiness. They still need agreements on repayments and, in some cases, collateral to back up the investments they will make. This seems to be about in line with a traditional bank, but that is rarely the case. Rather, these lenders work closely with borrowers to provide them with more insight and opportunity into the options available to them. They also work to solve problems as they arise, working hand-in-hand with borrowers to help them to qualify for the funding they desire.
Whereas a traditional bank places restriction and documentation limitations on any loan, that is not the case with hard money lenders. There is an application process. There are a variety of steps that must happen before private lenders will lend. Yet, there are fewer restrictions and far more opportunities available to todayâ€™s borrower with these lenders than with traditional lending institutions. For those borrowers who may have been told â€œnoâ€ before, hard money lenders open the door to new potential and opportunities to create outstanding results for just about any type of project out there.