Posts Tagged hard money
Private Money
Private money Lenders earn their money by making loans and providing loan services to individuals who need private money (loans made by private individuals.) There are generally two types of private money professionals, direct lenders and brokers. Most professionals in the industry are actually brokers. A few private money lenders act as both brokers and direct lenders. In these circumstances, the individual generally funds only one or two small loans each year and acts as a broker to borrowers for the rest of the loans that come through the door.
Deciding whether to go with a private money broker or a private money lender is much like deciding whether to purchase a home with the help of a realtor or whether to write an offer directly to the seller, representing yourself in the transaction.
Benefits Of Using A Direct Private Money Lender
The upsides of working with a direct private money lender or investor are pretty straight forward: you save money by cutting out the middle man. Brokers are compensated for the work they do by charging points on the loan transaction, often times in addition to the points the end investor charges. Because of this, the more brokers you have in a given transaction, the more the money is going to cost you when everything is said and done.
If you have been lucky enough to be working with a direct private money lender who is a good match for your project, you will be dealing directly with the end user or investor, avoiding the ?run around? that so many private money borrowers fall prey to. There are both positives and negatives to this.
By working with the end investor directly, you can be assured that you are hearing your information and updates first hand, which may allow you to close your transaction more smoothly. After all, no one knows your transaction like you do, no one can discuss any items that the investor may have questions about better than you are able to, and no one is as committed to your business and your private money loan as you are. The down side to working directly with the investor, however, is working with the direct private money lender means that either your loan funds or it doesn’t, there are no other options if the private lender declines your request, except to go back to searching for another direct lender that happens to like your particular transaction.
Benefits of Working With a Broker
The advantage of working with a broker is also clear: a good, hard working, well connected broker will know and have relationships with the direct investors with whom your loan scenario will fit. A quality broker will help you put toghether your loan package properly, improving the chances that you are able to obtain the funding you need at the terms you desire in the proper amount of time with minimal legwork and stress on your part. Selecting a good, seasoned private money broker will enable you to package your deal properly, which is extremely important, and send it to the correct direct private money lenders for your situation. Working with a private money broker will help ensure that your transaction goes as smooth as possible, and actually gets funded.
When you get right down to it, your choice to work with a private money broker or directly with a private hard money individual will depend on whether or not you personally know a direct private money lender and whether or not you want to present your scenario directly without the aid of a professional.
Loans And Credit
Today we are going to take a brief look at what makes up your credit score. For many hard money lenders, what your credit was did not used to make much of a difference. In the market today, on the other hand, things have changed, and even in the hard money world, your individual credit is playing a larger role in lending decisions.
Most people are in the dark when it comes to knowing and understanding the makeup of their credit score. We have put together a basic cheat sheet on credit score factors:
Thirtyfive percent of your credit score comes from the history of your payments. This is the biggest of your credit score, and the newest payment history is weighted the most. The items that make up this category are
- Judgements
- Repossessions
- Late payments
- Foreclosures
The next largest chunk of your credit score comes from accounts owed. Credit cards, mortgage loans, car loans, equity lines of credit and also other debts all make a difference in this section.
15% of your credit score is a result of the length of credit history, how long your various credit cards and other loans have been open in other words.
Ten percent comes from recent activity. Having your credit run falls under this section.
Finally, the last ten percent comes from the kind of credit you use.