Wednesday, July 12, 2017

Facts About Private Lenders For Real Estate Seattle

By Donald Sanders

Some people have the notion that after they get some deals or mortgages in their names, then they cannot have any problems with getting financing. This is not the case. After you obtain a number of mortgages listed in your credit report, you will find it next to impossible getting additional funds for other projects. This is exactly when you might need private lending. In considering private lenders for real estate Seattle residents need to be well versed with what is involved.

Using private money that is provided by individuals or entities does not get recorded in the credit report. There are various criteria used in decision making of whether the loans should be given or not. Most clients for these loans are regular people. The lender never submits a report to the credit bureau and therefore the loan is not reflected in the credit report.

What this means is these loans do not affect the credit of the borrower. They are not counted against your borrowing potential or the ratio of debt to income. If therefore you need to borrow money to use for other forms of investment, a lender does not see your list if mortgages in their report.

Building a network of lending companies for the purpose of real estate investment will mean you are not to explain to a creditor the reason for your many loans or mortgages. There is no requirement that you have to give proof of your income and whether it is sufficient to service the loan. Nobody knows about those loans even. The borrower and lender are the ones involved. Even two lending entities do not share the information unless a client wants.

The ease and speed with which this borrowing is possible comes with cost implications. The private lenders will impose very high interest on loan proceeds so that it covers for the obvious risk. They justify the high rates because of the fact that money they use for the lending is from private entities or individuals. This is unlike public lending which had the benefit of using state funds and which come with less risk.

Private lending is based on equity. This means that its collateral is specifically an assignment of the property to which the loan is applied. It might even cost less than proceeds of that loan. While private lending is hardly secured, there are instances where it is secured. Equity based lending pays more attention to how clear the deal is and not to factors like character, collateral or capacity of a borrower. This is despite the high risks.

This mode of lending comes with the advantage that repayments are made through a servicing company. These lenders are fully licensed and insured for services they provide. What this means is that monthly payments are made through recognized institutions rather than individuals.

The debt service coverage is not very strict. Since the forms never have any underwriting process means they are flexible. This is unlike the traditional lending options that have underwriting processes. The private entities use other features to determine client suitability.

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