Buying a property comes with a lot of moving parts. It can be a lot to take in between realtors, agreements, lawyers, mortgages, and home inspections. Sometimes, it doesn’t go as planned and getting financing becomes a struggle, leading your mortgage broker to suggest a private mortgage.

Don’t worry if this happens to you—you aren’t alone. This guide breaks down everything you need to know about private mortgage lenders and how to get approved.

What is a Private Mortgage?

A private mortgage is loan funding from non-traditional lenders such as friends, family, businesses, or another source. Private mortgage lenders charge higher rates and fees; however, they are generally easier to work with than traditional banks. However, they can still require a down payment, legal documents reviewed by lawyers, and registration with land titles.

Private mortgages help to finance the purchase of property or pay for home renovations and involve interest plus principal repayment options, much like standard mortgages. In some cases, private lenders provide a short-term solution until a borrower can qualify for traditional lending. 

When to Consult Private Lenders

Knowing when to turn to private mortgage lenders may illude some borrowers. After all, most of their borrowing experience has likely been with central banks. 

The following are the main reasons why borrowers rely on private mortgages:

1. The bank declined your application. Banks use several indicators to approve or reject finance applications, such as debt ratio, employment status, and repayment history. Lending criteria become stricter with changes in the economy or specific industries concerning reliable work, leading borrowers to seek alternative financing options.
2. Poor credit history. Poor repayment history lowers your credit score, and anything lower than 620 is not likely to be successful. Additionally, consumer proposals and bankruptcy stain your credit report for at least seven years and makes you a risky borrower in the bank’s eyes. However, your current financial situation may not reflect your score.
3. Self-employed borrowers. Steady, reliable income is crucial, and self-employed borrowers without regular income appear riskier. Strict lending practices prevent many strong self-employed candidates from achieving the mortgages they need.
4. Short-term needs. Not every borrower requires a long-term mortgage amortization or term. Private mortgages offer better, more workable term options and flexible repayment arrangements.

While traditional lenders may offer lower interest rates and generally cost less, they only approve the applicants who meet their strict lending criteria. Unfortunately, not everyone has a perfect credit track record, or their employment circumstances prohibit them from qualifying for a standard mortgage.

How to Qualify for a Private Mortgage

Qualifying for a private mortgage may be easier than working with traditional lenders; however, you still need to qualify for financing. Here is what you will need:

• Proof of income - bank statements, income tax returns, contracts, and employment agreements to help show you have a reliable source of income and proves you can make your mortgage payments now and in the future.

• A Down Payment - you typically need a down payment of around 15% of the property’s purchase price.

• A Sellable Property - the mortgage must be secured by a property worth at least the value of the mortgage and is sellable should the borrower default on the loan.

Let a Professional Mortgage Broker Do the Legwork

Applying for and negotiating mortgages is not something you typically do every day. Professional mortgage brokers undergo intensive training to achieve certification and develop valuable relationships with traditional and private mortgage lenders. Their skills and knowledge help borrowers save money and get the optimal mortgage for their needs.

So, when you are ready to buy your next property, look no further than Axiom Mortgage Solutions. Their friendly team will broker the right mortgage and best rates for you and your family.

Start Your Mortgage Application Today! Apply with Axiom online or by calling (289) 260-1908 now.