Private Money Mortgage

4 Replies

First time investor. I have found a nice 100K house (3 bed 1 bath) in good shape that would rent for 1200 plus utilities, in my area. Currently, I would not be able to put the 25% down that the bank would require. Would it make sense to carry the loan with a private money lender? Would they typically take a 15% or lower down payment? I also already have a tenant that is looking to rent a house with this exact stats. for 1300 a month plus utilities. Any suggestions would be great. 

@Brady Moxham You should speak with a mortgage broker to see what options you could qualify for. Would you consider renting rooms or living there for a year? If so you could probably do a FHA loan as low as 3.5% or possibly a USDA loan (area specific) for 0 down. Private money wouldn't really be much of an option for a long term purchase unless it's basically family or friends who want to lend a large chunk of money at very favorable rates.

Like @Daniel Vandenbos mentioned, most private lenders are going to have a much shorter timeframe when they want to be paid back (12 months is pretty common) than a traditional bank mortgage. So it may not work for a long term solution, but you can ask your friends/family and see what their interests/goals are. Just make sure you have an exit plan before going into it. For instance, if you have a family member that’s willing to loan you the money but wants to be paid back in 5 years, you need to have a plan to refinance out of that loan before that time. 

@Daniel Vandenbos Thanks for the reply! This actually is a single family home and I do not want to move into it. Also I would only need the loan long enough to save up the down payment amount. Im only about 15k short. As I will be starting my first salaried job in December I would be able to easily save enough to cover that. After a year I would just refinance with a bank and pay off the private money. Would this make sense? The only thing I was thinking was doing a 20K line of credit to pay the down payment. 

Originally posted by @Brady Moxham :

@Daniel Vandenbos Thanks for the reply! This actually is a single family home and I do not want to move into it. Also I would only need the loan long enough to save up the down payment amount. Im only about 15k short. As I will be starting my first salaried job in December I would be able to easily save enough to cover that. After a year I would just refinance with a bank and pay off the private money. Would this make sense? The only thing I was thinking was doing a 20K line of credit to pay the down payment. 

 How about finding a partner to come in on the deal with you. All they need is $15k and they are now a real estate investor. 

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