“The cheapest loan isn’t the best loan if it can’t close when your contract says it must.”

What to Expect from Banks and Institutional Lenders

The Upside: Lowest Rates + Best Terms

Banks, institutional lenders, and GSE-style programs generally offer the lowest interest rates and the most borrower-friendly terms.  For many buyers—especially those with substantial income, clean documentation, and plenty of time—this is the obvious first stop.

Best fit for banks:

• Stable income and strong credit
• Standard property type
• Plenty of time to close
• Straightforward “W-2 / tax return” Borrower profiles

The Tradeoff: Rigid Rules and Limited Flexibility

Bank employees operate under strict underwriting guidelines.  That consistency is what creates low rates—but it also means less latitude for exceptions, even when the deal is strong.

Common friction points:

• Strict documentation requirements
• Conservative appraisal and property-condition standards
• Approval layers that slow down decisions
• Policy limitations that prevent “common sense” exceptions

“Banks don’t underwrite the deal you mean to present—they underwrite the file you can prove on paper.”

The Reality: Longer Timelines (Often 60–90 Days)

If you’re chasing a very low rate, be prepared for a maze of paperwork and a drawn-out processing timeline.  It’s not unusual for bank loans to take 60–90 days, especially when files are returned for additional conditions.

Why this matters:

Real estate transactions are often stressful and time-sensitive.  When underwriting delays push beyond the contract closing date, borrowers can lose deals, deposits, rate locks, or negotiating leverage.

If your contract is tight, ask this up front:

• How long are purchases taking right now (not “average”)?
• What conditions commonly cause delays?
• Who controls the file—processor, underwriter, or committee?
• What happens if the appraisal is late or comes in low?

Why Many Borrowers Choose Private Money Anyway

When time, complexity, or property condition become critical, private loans often excel, especially for properties needing repairs, unconventional income, or quick closings, helping readers understand when private lending is the better fit.

Private money is often used when:

• A property needs repairs or won’t qualify conventionally
• The Borrower has non-traditional income documentation
• The deal requires a fast close (days/weeks, not months)
• The Borrower is solving a short-term problem (bridge, rehab, refinance later)

Private lending can make sense when:

• The profit on the deal is substantial
• The Borrower plans to refinance into cheaper debt after stabilizing the asset
• A fast close creates negotiating power (discount purchase, quick release of contingencies)

“Private money is expensive—until it’s the reason you win the deal.” While private loans may carry higher interest rates and fees, understanding these costs upfront enables you to evaluate whether the certainty and speed justify the expense, aiding informed decision-making.

Loan Agents and Brokers: Who Represents Whom?

This is where borrowers often feel confused—so let’s clarify how brokers and dual agency work to ensure transparency and trust in your dealings.

1) Loan Broker (Borrower’s Agent)

A loan broker typically acts as the Borrower’s agent, helping the Borrower find, structure, and arrange financing in exchange for compensation.

Key point:

A borrower-focused broker should represent the Borrower’s best interests—pricing, terms, execution, and fit.

2) Mortgage Broker Arranging Private-Party Loans

In private lending, a “mortgage broker” may arrange loans funded by private investors.  In that structure, the broker often serves as the middle person between:

• the Borrower, and
• the investor/lender(s) supplying capital

Sometimes the broker may temporarily close using their own funds, then allocate the loan to investors.  More commonly, the broker closes using investment capital from third-party private lenders.

Key point:

In many private-money structures, the broker has fiduciary duties to investor-lenders—meaning the broker’s role includes protecting investors’ interests as clients.

3) Dual Agency (Proceed Carefully)

Sometimes, a broker may act as a dual agent—representing both Borrower and lender/investor in the same transaction.

This can work only when:

• everyone is experienced and professional, and
• disclosures are clear, and
• each party understands the laws of agency, including potential conflicts

“If one person represents both sides, clarity and disclosure aren’t optional—they’re the whole deal.”

Quick Decision Guide

Choose a Bank/Institutional Lender when:

• You have time (often 60–90 days)
• Your file is clean and conventional
• The property meets standard guidelines
• Your priority is lowest cost over fastest execution

Consider Private Lending when:

• You need speed or certainty
• The property is distressed or non-standard
• Your documentation is unconventional
• Your priority is closing the deal, then refinancing later

Bottom Line

Banks tend to deliver the best pricing, but private lending often provides the best execution under pressure.  The right choice depends on one question:

Are you prioritizing the lowest cost or the certainty of closing on your timeline?  Clarifying this helps you feel more in control and confident in your choice.