A private loan is made available by private investors who provide financing to borrowers who were turned down by mainstream lenders. Loan officers or lenders act as liasions between these investors and potential borrowers, matching them according to their needs. Terms and rates will vary.
Those in search of a loan officer may find one in the Yellow Pages, online, or through a personal recommendation. Any lender one is considering doing business with should first be checked out in terms of their foreclosure rate, and also be requesting and contacting several current or past clients as references.
After settling on a particular lender, the next step is the application. Borrowers must submit a “Statement of Information” form and all relevant supporting documents, this is done to present the investor with an overall picture of the applicant’s financial position. It’s best to be forthcoming with the lender about any credit, collateral problems etc., since part of their job is to come up with ways to work around these.
Based on the information presented in the client’s application, he or she will be offered a suitable money loan package that matches their needs, assuming they pre-qualify. The rates and amount of the loan are determined by both the ability to pay it back and the nature of its intended use. It’s advantageous for the borrower to explain in detail to the lender, how the loan will be used.
If the loan is to purchase a property, appraisal, obtaining a Broker Price Opinion or Automated Valuation Model, and dealing with an escrow company may also be involved. What’s more, any outstanding liens against the property or applicant must be resolved and confirmed with the appropriate documentation before any new loan can be approved.
Upon the approval of the loan, documents will be drawn up by the lender and presented to the borrower for review and signing. Next, the funds are issued to the client, proceeds forwarded to the investor, and all pertinent documents filed with the county. The loan will be “boarded” by the servicing company, which effectively sets up the payment plan for its lifespan.