As stated above, private lenders loan money but are not part of a bank or affiliated with a government agency, which means that they can offer more flexible loan terms.
Private lenders are companies or individuals that loan money but are not part of a bank or are affiliated with a federal government agency, enabling them to offer more flexible loan terms. In this context, the adjective "private" does not connote that the company is privately held. There are private lenders that are publicly traded companies.
The most common types of private loans are personal, business, and real estate.
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Visio Lending is a private mortgage lender that specializes in financing single-family rental properties, including vacation rentals. Because we're not part of a bank and don't lend on government programs, we can offer loan products with features and loan terms that meet the unique needs of real estate investors.
A private mortgage is an arrangement between a borrower and a private lender who agrees to fund a business transaction. The borrower pays back with interest through a monthly payment, as they would with conventional loans. All parties involved will agree to the loan term, interest rate, and penalties if a borrower defaults, which is then finalized in a promissory note.
Most private lenders are companies with access to a large amount of funds, but they may also be real estate investors or other industry professionals. Even family members or people with whom you have a personal relationship may be considered private money lenders if they front the initial cost of an investment and are paid back through monthly payments, whose terms will be outlined in a mortgage note. This is also known as a non-arm's-length transaction.
Private loans can be used for a variety of real estate needs, such as upfront purchases or repair costs. You can also get construction and renovation loans if you want to build or renovate a property.
Companies that offer private mortgages can make up their own lending guidelines, including their application process and requirements, though they are still bound to some federal standards in regard to what they can charge. Many private lenders will specialize in certain industries. For example, Visio Lending works exclusively with real estate investors, so we have more in-depth knowledge than lenders who generalize.
Private real estate loans are more flexible and customized, as a private lender will have more leeway on what they will accept. Traditional banks have very strict guidelines on who they will lend to and on what terms, as they are bound by regulatory standards, such as the applicable federal rate. They also tend to be more risk-averse, so they won't lend to those with low credit scores or a high debt-to-income ratio.
Furthermore, the traditional loan from a financial institution is geared more toward residential home buyers rather than income-producing properties, so their underwriting process involves extensive research into your personal finances. This can put self-employed borrowers at risk of being denied, as they won't have the documentation that traditional lenders seek, like pay stubs and W2s.
Private money loans are easier to qualify for and have more flexible loan terms than other loan types. However, a private mortgage also has a higher interest rate and fewer protections than a traditional mortgage.
Further, private lenders create their own guidelines and processes, and therefore have more flexibility compared to traditional lenders. For instance, a private lender could be a family member lending their own money with their own payment schedule. A traditional lender is going to lack flexibility yet have fewer risks.
As we have reiterated, a traditional home loan is more affordable and less risky than a private loan. There are, however, some use cases where working with private lenders makes the most sense.
Here are some borrower types who should work with a private lender:
Borrowers with poor credit history: Private lenders can lend on their own criteria and determine your financial situation at their discretion.
Borrowers looking for personal money: Often, if you need money for a car or a wedding a family member may be willing to give you the best terms.
Borrowers looking to grow their portfolio of rental properties: For professional investors with multiple mortgaged rentals, the requirements for a traditional home loan or financing from a bank may be too stringent.
We offer private mortgages with:
Full 30 year terms, no balloons
Streamlined qualification process emphasizing property cash flow
No tax returns or employment verification required
Up to 80% LTVs
Simple haggle-free pricing you can depend on
Protect your identity and other assets by borrowing in a corporate entity
Visio Lending is the nation's premier lender for buy and hold investors offering, long-term loans for SFR rental properties, including vacation rentals.