Questions about a mortgage: Private Party vs. traditional lender / bank?

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Potentially an issue obvious real estate, but hey, it’s Yahoo Answers, so I’m free all the stupid questions I want to ask me: Instead of an expensive mortgage with a lender such as Countrywide, why I can not get out and easy to find someone with capital and say “Hey, could you give me a $ 150,000 loan at 4%, and I give you first lien on the house if the payments are, by default? Agreement is signed with a company and I created a draft decree EFT is money deducted from my account every month to benefit Zahlungen.Der for me is a small advantage Zahlung.Der monthly mortgage for the guy 4% lender that nothing moves, and he may be able to pocket the house if I am in default (which would be very unlikely). advantages / disadvantages of this plan? And what should I fail, Perhaps most painfully obvious here? (. And no, I do not intend to do, it’s just something I’ve been communicating and I do not even know where to go, a person rich is willing can not find anyway ..:.)

  1. Reply
    January 28, 2011 at 3:29 am

    I am a mortgage broker and the answer is that you can get a private investor. The problem is that most private investors will not give you a 4% interest rate and also that they will want to see you invest some of your money first so if you are looking to do 100% financing that is really not an option.

  2. Reply
    January 28, 2011 at 3:53 am

    There are a few things that your forgetting in your line of thought.
    1) A seller that is willing to hold the note for a property that he/she is not going to hold a note for 100% of the property value. Typically they will hold a note for 10-20% of the mortgage, but it will not be at 4%. Prime at this time is 7.75% so if your lucky, you’ll get prime. Secondly they are not going to hold the note for 30yrs. They are going to want a balloon payment in 2-4 years (depending on their mood).
    2) Hard money lenders (the rich people) will not lend on property with more than a 60% LTV. Meaning that you the borrower would have to supplement the remaining value of the purchase. And don’t try to sneak in a second the day after closing on them. They will run a title search to make sure that doesn’t happen. Also, they will not lend on primary home, just investment properties. Last but not least…the cheapest hard money lender that I dealt with charged my client 14% w/2pts. That’s expensive money…

  3. Reply
    January 28, 2011 at 4:17 am

    your plan is not a plan, it is a wish wait for it to come true one day. Dreamer!

  4. Reply
    January 28, 2011 at 5:16 am

    Mortgage companies are regulated by tons of different people to protect you and to protect themselves. If you were to get a mortgage from an individual, the actual documentation may not have the same provisions and protections. This individual may have some crazy rights through the non-standard documents that would not be in place otherwise. i.e. foreclosure after one late payment or something equally ridiculous.

    In addition, I also doubt than anyone would lend money at such a low rate. If someone has this much money, they are probably getting a better rate of return on a money market or CD or almost everything else right now.

  5. Reply
    January 28, 2011 at 5:39 am

    Yes there are private investors or “hard money” lenders out there but their rates are generally in the 12%+ range. You could possible get something close to that with a contract for deed arrangement in which the seller maintains all the tax advantages of the home and you make the payments. You would generally be subject to the existing note on the property, unless you found one that was free and clear. In that situation you could possibly work out something else with a lower rate, but I doubt you would ever get someone to offer you anything better than what a traditional lender would give you.
    Good thinking- but doubt it would ever happen.

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