The private money real estate lending field has two subsets. The first subset consists of procuring real estate loans. The second subset is about procuring private party investors/lenders who choose to invest capital into the loan transactions.
A mortgage broker may solicit prospective loan transactions from various sources according to their skill set and marketing strategy. This is defined by property types and loan purposes. Each subset may require a federal or state license or no license at all. When the lender locates a viable loan transaction they attempt to collect as much relevant data as possible. Of course, this task is subject to their knowledge, experience and willingness to do things correctly and prudently.
With the prospective lead in hand, the lender then contacts a funding lender/broker. The funding lender solicits private parties who are interested in investing some of their capital into the loan transactions as a “tenant-in-common”. Each lender private party beneficiary. The private party beneficiary takes the place of the bank. The prospective lender is motivated by the interest rate yield that transfers into a monthly income stream. The funding lender will process and develop a completed underwritten disclosure package to submit to the potential investor for approval. The funding lender will usually manage the loan servicing after the closing, collecting the payment from the borrower, and distributing all or a portion to the lender beneficiaries. The same funding lender company will also manage the payoff demand until the lender beneficiaries receive his/her capital back.
Some mortgage companies’ function in both capacities, meaning that they solicit loan transactions, then fund the loan with their in house investor relationships.
Understanding the actions required from the initial solicitation of prospective borrowers to the end payoff at the maturity of the loan requires a learned skill-set that develops over time.
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