Disclaimer: This FAQ is for general educational purposes and isn’t legal, tax, or financial advice.  Loan programs and rules vary by lender, state, and property type.

1) Should I always choose the lowest interest rate?

Not always.  The “best” loan is the one that closes on time and matches your strategy.  Recognizing potential delays and costs helps you make confident decisions, especially when a low rate doesn’t prevent you from losing the deal due to timing issues.

2) How long does a bank or institutional loan usually take?

Many bank- and institutional-purchase loans can take 60–90 days, particularly when underwriting conditions, appraisal timing, or documentation issues arise.  Some close faster, but you should plan conservatively if your contract timeline is tight.

3) Why do bank loans take longer?

Banks and institutional lenders often have:

• Multiple approval layers (processor → underwriter → supervisor/committee)
• Strict documentation checklists
• Appraisal and compliance requirements
• Limited flexibility when a file doesn’t fit standard guidelines

4) What kinds of deals are best suited for banks?

Banks are typically best when the loan file is “plain vanilla”:

• Strong credit and stable income
• Straightforward property type and condition
• Clean documentation (W-2s, tax returns, transparent asset sourcing)
• Plenty of time before closing

5) What is “private money,” and who uses it?

Private money is lending funded by private individuals or private lending firms (as opposed to traditional depository banks).  It’s commonly used by:

• Investors buying value-add or distressed properties
• Borrowers needing speed, flexibility, or unique underwriting
• Borrowers planning to refinance later into cheaper long-term debt

6) How fast can private lenders close?

Often faster than banks—sometimes in days to a few weeks, depending on title, appraisal/valuation method, and how quickly documents are provided.  This speed and flexibility can give you a strategic advantage, helping you feel more in control of your project’s timeline and success.

7) Why would anyone pay higher rates for private money?

Because certainty and speed can be more valuable than rate when:

• The deal has a hard deadline
• A fast close earns a discount or better terms
• The property needs repairs and won’t qualify for bank financing
• You’re using private money as a short-term bridge to stabilize and refinance

Takeaway: “Private money is expensive—until it’s the reason you win the deal.”

8) What are the most common reasons bank deals get delayed or denied?

Common issues include:

• Appraisal problems (value, comps, condition)
• Documentation gaps (income, assets, deposits, business finances)
• Debt-to-income or cash reserve requirements
• Property condition or insurance issues
• Last-minute underwriting conditions that take time to satisfy

9) What’s the most significant risk of private money?

The most significant risk is not having a clear exit plan, such as:

• Refinancing into conventional/DSCR financing after repairs or seasoning
• Selling the property after improvements
• Paying down principal with another capital source

Private loans are often shorter-term, so timing matters.

10) What fees should I expect with bank loans vs. private loans?

In general (and it varies widely):

• Bank loans: lower rates, standard lender fees, third-party costs (appraisal, title, escrow)
• Private loans: higher rates and often higher fees (origination, underwriting, processing), plus standard third-party costs

Always request a Loan Estimate (or a fee worksheet) and a list of third-party fees.

11) What documents should I prepare to avoid delays?

For bank/institutional loans, have these ready:

• Income docs (W-2s, pay stubs, tax returns, K-1s if applicable)
• Bank statements and proof of down payment source
• ID, entity documents (if buying in an LLC), and insurance info
• Lease agreements and rent roll (for investment property)
• Explanation letters for credit inquiries, deposits, or anomalies

For private lending, expect a stronger focus on:

• Property details, rehab scope (if any), and budget
• Exit strategy and timeline
• Value support (comps, appraisal, broker opinion of value)

12) What is “dual agency” with a mortgage broker, and why does it matter?

Dual agency occurs when a broker represents both the Borrower and the lender/investors in the same transaction.  It can be done ethically, but it requires:

• Clear disclosures
• Professional conduct
• Understanding of potential conflicts (who the broker owes fiduciary duties to)

When in doubt, ask: “Who are you legally representing in this transaction?”

13) How is a loan broker compensated?

Compensation varies and may include:

• Borrower-paid broker fee
• Lender-paid compensation (common in some consumer mortgage structures)
• Origination points and processing/underwriting fees (standard in private lending)

Request a clear written breakdown: “What am I paying, who receives it, and when?”

14) How do I compare a bank offer to a private loan offer fairly?

Compare these side-by-side:

• Total cost of capital (rate + points + fees + time)
• Speed and certainty of close
• Prepayment penalties and minimum interest
• Draw schedule (if rehab)
• Required reserves and documentation burden
• Extension options if timelines slip

Remember, a cheaper loan that can’t close on time or meet your strategic needs may end up costing more in the long run.  Focus on the whole picture, not just the interest rate, to make smarter financing choices.

15) What’s a smart strategy if I’m not sure which route will work?

Use a two-track plan:

• Start the bank/institutional process early (if you have time)

• Keep a vetted private lender as a backup in case underwriting delays threaten the closing date

This approach protects your timeline without forcing you to incur unnecessary costs.