Summary:

The primary benefit of private money loans is speed... These loans are funded by investors motivated by yield, which is the return on investment, and secured collateral rather than banks. In this context, yield refers to an investor's profit or return on their investment. This key factor motivates private money lenders to fund these loans. The second benefit is flexibility in underwriting requirements such as credit, income, condition of the collateral property, and borrower documentation... With fast approval and often funding within 2-to-14 days for bank declines and fallouts (when a bank-approved loan does not close due to various reasons such as buyer's credit issues or property condition), these loans provide a swift solution when time is of the essence. As a borrower with problems to solve, would you be willing to trade off the lesser interest rates at the bank for a quick closing for higher rates and points?

Article:

The bank's delay forced them to release the $100,000 deposit proceeds for a two-week extension. Then, the unexpected happened: the bank was fixated on a seemingly insignificant condition, a minor discrepancy in the property's title, which became the 'straw that broke the camel's back.

The couple was in a race against time. They needed to close the deal fast or risk losing their $100,000, a significant amount. The seller had a backup offer higher than the couple's purchase price, which meant they were on the verge of losing the property if they didn't act swiftly.

In a state of panic, the couple turned to their knowledgeable mortgage broker for help. The broker's ability to pivot to a private money lender for a bridge loan, a 12-month, interest-only loan, was a game-changer. This astute decision allowed the couple to close their deal and avoid losing their $100,000 deposit, relieving them of initial panic and stress. This highlights the urgency and pressure of the situation, which private money loans can help alleviate.

The private money lender wasted no time. They swiftly acquired the loan file from the institutional lender, which included the open escrow, preliminary title report, application, financial statement, bank statements, insurance information, copies of the rental agreements, credit report, background search, and appraisal. With a quick review appraisal, the private money lender approved the loan, substituted in as the lender, drew loan documents and disclosures, and closed the deal in just five business days.

The private money lender played a crucial role in this scenario, providing a much-needed solution. Their timely intervention ensured the couple's deal was closed, bringing a profound sense of relief. The broker fee was well earned, and the couple was deeply grateful for the lender's swift and effective action. This experience fostered deep gratitude and trust in their relationship with the lender, highlighting the potential for strong relationships in private money loan transactions.