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Private Mortgage Funding

Looking for Private Mortgage Funding?

If you have been looking around for private mortgage funding sources, you have more options then you think. To purchase a home, you likely do not have all of the money on hand you need to buy it outright. The majority of people go to a bank and make a down payment on the purchase of the home, while the bank covers the rest, while the new homeowner starts paying the bank back over time. In Canada, the majority of these loans are amortized over 25 or 30 years, but since no loan can have a term longer than ten years, mortgages go through a process of renewal or refinancing at the end of each term.

Private Mortgage Funding Process

If you want a bank to approve your application for a loan, you’ll need a down payment of at least 5 percent (with exception of a flex down), although 20 percent is preferable if you want to avoid paying mortgage insurance premiums that go along with these “high-ratio” loans. You’ll need a credit score that meets the bank’s approval, and you will also need to show that you have a history of income at a level that will give you the resources to pay your mortgage each month.

With these three requirements, there are a lot of people who have the wherewithal to buy a home and make the payments, but the banks won’t deal with them. Some of these people are self-employed, and so they don’t have the income history that the banks want. Other people have had financial difficulties in the past, and so their credit scores aren’t to the point that the banks would like. Some of these people turn to rent-to-own or lease purchase agreements in order to get into a house, but the problem with those is that the pool of available homes is limited, which means that Private Mortgage Buyers often have only a small collection of unattractive homes to look at. Also, if you sign that sort of agreement and can’t get financing at the end, all of the “rent credits” that were supposed to go toward the purchase price end up going down the rent drain as well. So how can you get into a home purchase even if your credit score is low?

Private mortgage funding sources

Another option that is becoming more and more popular is the private mortgage. Amansad Financial is a mortgage funding manager with  connections to quite a few individuals and companies who want to invest their funds in the real estate market. Mortgages are more secure than stocks and commodities, but especially in private lending, they can bring in a significantly higher interest rate than putting money in a savings account or certificate of deposit.

Mortgage loan funding process

If you’re thinking about applying for a private mortgage, there are a few things you need to know. First, you’ll often need to have a higher down payment in the range 25 to 30 percent ready to put down, but it is possible to put together a package with as little as 15 percent, and sometimes 10% with much patience. The reason for this is that your credit score is not used to determine whether you get the loan. The fact that banks won’t give you a loan means that, for private lenders, it is the value of the property itself that will determine whether you receive the loan. Putting down more than 25 percent lowers your LTV (loan to value) ratio. If you default, the lender will look to the sale of the property to recoup his or her loan, and so the value of the property is more important than your ability to pay.

On the other hand, people will default on their house payments last of all, which means that private mortgages are still a fairly good bet for lenders. The fact that you didn’t get a bank loan means that you’ll be paying a higher interest rate, but you’ll be in the home that you want.

Also, be prepared for a loan term that is fairly short — no more than two years, and at times three years. Some lenders will allow for longer amortization periods, but you’ll need to be ready to pay the whole loan off at the end of the term by way of refinancing with another lender, cash payout, or sale of the property. This means that your monthly payments might be lower, but you will have a balloon payment waiting at the end. The purpose of this is to give you time, during the private mortgage period, to get your credit score high enough and to build an income history that will satisfy the bank. That way you can line up a bank mortgage to take over the balance remaining when your private mortgage comes to an end.

If you are looking for private mortgage funding, call Amansad Financial today. We have connections with investors who are ready to help you get into the home you’ve been waiting for.

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Daniel K. Akowuah | Mortgage Professional / DLG Underwriter
