Are there mortgage brokers for private money loans?
Investor · Los Angeles, CA · Member since 2017 · 61 posts · 74 votes
Are there mortgage brokers for private money loans?
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Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7yOriginally posted by @Scott Benton:
Before the 2007–2008 mortgage meltdown, getting a conventional loan was much easier. If you could prove you had income on your tax returns whatever the source (1099, temporary positions or non full status employee positions), you could get approved. Now it seems that banks want you to demonstrate that you’ve been in a full-time job as a full-status employee with all the benefits for over two years as part of the approval process. It’s much harder to get conventional loans. Even if you have passive income from other properties, they only count a portion of that income towards qualification. My 850 credit score was also less important to a broker I spoke to and who felt I wouldn’t get qualified for a conventional 30 year fixed. Since I work in the motion picture business where you move around a lot from studio to studio, I can’t show steady employment with one single company for two or more years which means I may need to explore the world of private money. With that in mind, just like with conventional loan brokers, are there brokers who can find sources of private money I might want to check into?
Actors Federal Credit Union in your neck of the woods caters to actors, musician and film industry personnel. Heard it on a podcast recently. They understand and lend to volatile income folks from what I understand. Good luck!
17 Replies
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
there are not and do not let anyone tell you they are.. they are brokering for HML ..
HML use private lender as a marketing ploy they are all HML any lender that lets a broker get a fee or advertises is a HML in the business..
a private lender the definition is you .. you have a few bucks in your IRA and yo want to lend it to someone you met at a REIA meeting and you do less than 3 ayear or so .. so you don't need a license in CA..
and for sure there are all sorts of frauds and fakes out there that will promises the moon as long as you pay them 500 fee or whatever in up front fees then you never hear from them.. they troll every social media outlet from facebook to linkdin to BP
I mean what better place to troll for those looking for money than a real estate site. Careful.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes7y
Originally posted by @Scott Benton:
Before the 2007–2008 mortgage meltdown, getting a conventional loan was much easier. If you could prove you had income on your tax returns whatever the source (1099, temporary positions or non full status employee positions), you could get approved. Now it seems that banks want you to demonstrate that you’ve been in a full-time job as a full-status employee with all the benefits for over two years as part of the approval process. It’s much harder to get conventional loans. Even if you have passive income from other properties, they only count a portion of that income towards qualification. My 850 credit score was also less important to a broker I spoke to and who felt I wouldn’t get qualified for a conventional 30 year fixed. Since I work in the motion picture business where you move around a lot from studio to studio, I can’t show steady employment with one single company for two or more years which means I may need to explore the world of private money. With that in mind, just like with conventional loan brokers, are there brokers who can find sources of private money I might want to check into?
Actors Federal Credit Union in your neck of the woods caters to actors, musician and film industry personnel. Heard it on a podcast recently. They understand and lend to volatile income folks from what I understand. Good luck!
- Investor · Los Angeles, CA · Member since 2017 · 61 posts · 74 votes7y
@Jay Hinrichs — Thank you. I’m definitely not looking for hard money. I’m looking for a 30 fixed as I get deeper into the BP community and look for my next investment once I’m able to find an area or areas I want to farm and once I get proficient at analysis and making offers. The myth I’ve been operating by is that if you can’t get a conventional, then you’re out of luck. So I need to solve for the finances from a lender. I know I can always bring on partners to get the loan, but I want to exhaust the access to private money idea before I go that direction.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Scott Benton:
@Jay Hinrichs — Thank you. I’m definitely not looking for hard money. I’m looking for a 30 fixed as I get deeper into the BP community and look for my next investment once I’m able to find an area or areas I want to farm and once I get proficient at analysis and making offers. The myth I’ve been operating by is that if you can’t get a conventional, then you’re out of luck. So I need to solve for the finances from a lender. I know I can always bring on partners to get the loan, but I want to exhaust the access to private money idea before I go that direction.
30 year fixed interest loans and Private investors do not go together.. if that's what your looking for your going on a snip hunt.
there are HML that offer this at about double the current interest rates.. 8 to 10% is what you can expect to pay.
Look up Peak lending in KC they have this product.
- Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes7y
IDT you will get a 30 year fixed from a PML (some may do it, but not many). Some HML's do offer 30 year fixed at higher interest rates though.
- Investor · Los Angeles, CA · Member since 2017 · 61 posts · 74 votes7y
@Steve Vaughan — thanks for the heads up.
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Scott Benton:
(1) Now it seems that banks want you to demonstrate that you’ve been in a full-time job as a full-status employee with all the benefits for over two years as part of the approval process. It’s much harder to get conventional loans.
(2) Even if you have passive income from other properties, they only count a portion of that income towards qualification.
(3) Since I work in the motion picture business where you move around a lot from studio to studio, I can’t show steady employment with one single company for two or more years which means I may need to explore the world of private money.
(4) With that in mind, just like with conventional loan brokers, are there brokers who can find sources of private money I might want to check into?
Hi Scott,
Some speculation to follow based on what I've seen, please ignore anything not applicable to you.
(1) That's not accurate. It's either W2 salary permanent full time (or 40 hours week consistently, permanent full time W2) and it instantly counts in 99% of scenarios OR for self employed / contractors / gig stuff they typically want 2 years on tax returns, since 90% of new businesses and enterprises fail within 2 years. If you're a camera man that roves from studio to studio as a 1099 contractor, that sounds like a Sch C sole proprietorship as a "camera man" and a single Sch C that reports all income from all studios (NOT one Sch C for Time Warner, another for Disney, and another for Fox). Honestly report your income for a couple years and you will be fine.
(2) Net positive cashflow appearing on tax returns is counted at 100% of value. Speculative rental income from a vacant property you are purchasing, yes it is counted partially, at 75% of value.
(3) See #1. My wife works in theater as an independent contractor, it's the same deal. You have one business entity that gets income from a variety of clients, no different than your local Safeway having one business (grocery store) that gets income from lots of sources (10,000 different customers).... Safeway doesn't declare 10,000 different business entities. If you're declaring different business entities for each studio that hires you, that's a) inaccurate and b) will jam you up come mortgage time.
(4) Yes, but you will pay more in higher interest over 5 years than what you will pay in taxes if you just declare your income accurately, honestly, and properly, when you do your taxes. If you prefer this higher interest rate option, "Non-QM" is the google search term that'll put you in the shark world.
As always, your aunt and uncle talk to each other. If you're lying to Uncle Sam about your income, he's going to tell Aunt Fannie Mae and she isn't going to be there when you hit her up for a loan. If that isn't applicable to you, please disregard this paragraph.
- Investor · Los Angeles, CA · Member since 2017 · 61 posts · 74 votes7y
@Chris Mason — Thanks, Chris. That’s helpful. It is not was I was advised by a mortgage broker and sounds like I should try for prequalification regardless to see if I can get a conventional 30. I can easily demonstrate 2 years of W-2 money (from temporary staffing sources) and strong passive from occupied and professionally managed properties. I’m thrown off, I was told, by not having a “real” job.
If what you say is true, then I could most likely bypass the world of hard money and private or portfolio loans and qualify for a conventional 30 fixed with slightly higher interest rates possibly. That would definitely allow me to pick up the next property perhaps. A cash flowing market like Memphis might become within reach if I don’t happen to qualify for more than, say, $100k to get into a decent positive Cashflow position even if I go turnkey. Better if I can farm and offer well below asking.
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Scott Benton:
@Chris Mason — Thanks, Chris. That’s helpful. It is not was I was advised by a mortgage broker and sounds like I should try for prequalification regardless to see if I can get a conventional 30. I can easily demonstrate 2 years of W-2 money (from temporary staffing sources) and strong passive from occupied and professionally managed properties. I’m thrown off, I was told, by not having a “real” job.
For some clarity on why you were told this, let's go ahead and go to the lowest common denominator: car sales lot.
If you walk onto a Ford lot and say you want a car that fits characteristics X, Y, and Z, characteristics that ONLY Toyota includes in one vehicle, an average Ford salesman will just tell you it doesn't exist and invite you to take a look at the F-150 or Ford Focus. The average Ford salesman isn't going to send you to the Toyota dealership!
You talked to an average mortgage person who doesn't work with self employed people, he simply doesn't have that "car" on his "lot," so he invited you to check out what he does have -- mortgages for salaried W2 people.
A super easy experiment you can do to confirm this phenomenon, call Quicken Loans and say you want an FHA loan on a triplex. They will tell you it doesn't exist and invite you to look at duplexes. But 30 seconds on biggerpockets.com tells you that FHA loans on triplex do exist...
Also, here's a song that this post reminds me of, with the "real job" part, not really directed at you but I thought it was funny: https://www.youtube.com/watch?v=Adz1aWRsDw8
- Investor · Los Angeles, CA · Member since 2017 · 61 posts · 74 votes7y
@Chris Mason — Awesome...and funny. But is t the point of all of this so we DON’T have to get a haircut and a real job? It’s what I like most about the FIRE scene myself.
- Investor · Los Angeles, CA · Member since 2017 · 61 posts · 74 votes7y
Not sure. Probably a SFH most likely.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Nasir El Ameer:
@Scott Benton
What type of property is the loan needed for?
Also what is your strategy is this a refi cashout or a purchase?
@Jay Hinrichs
30 yr fixed is available and I have source that offers this for non owner occupied for residential up to 4 units and commercial up to 5 million.
The lending landscape is so much more than hard money. Hard money is limited funds for short term financing.
Private investors or private money from a local guy is not enough money.
Banks have average loan terms at best and to get the best terms (30yr fixed) requires you to move heaven and earth.
So whats left...
The alternative non bank lending space private in the sense that its a private entity but not one person.
Their loan offerings and loan approval criteria are more flexible than traditional sources and they are not limited to short term financing deals like a HML would be.
On top of that I advise everyone to steer away from anyone asking for a fee upfront that is not justified after an LOI is signed for due diligence on the commercial side.
If its on the residential investment side then their should not be a fee because its no major due diligence that needs to be done.
All in all 30 yr fixed is available pm for details.
Exactly your talking about a lender who is in business to lend I am aware there are all sorts of loan products.. but the OP is talking about a private lender.. not a company.. my point is private lenders don't let others broker their money one they don't have enough.. most private lenders will have a few hundred grand to maybe a million to put out.. how far does that go in your world.. answer not very far LOL
- Lender · Los Angeles · Member since 2018 · 53 posts · 12 votes7y
Lol you are certainly correct about that.
Real estate needs its own dictionary and bible of character stories lol so everyone can see the light lol
- 7yStephanie P.Pro MemberWashington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
Originally posted by @Scott Benton:
Before the 2007–2008 mortgage meltdown, getting a conventional loan was much easier. If you could prove you had income on your tax returns whatever the source (1099, temporary positions or non full status employee positions), you could get approved. Now it seems that banks want you to demonstrate that you’ve been in a full-time job as a full-status employee with all the benefits for over two years as part of the approval process. It’s much harder to get conventional loans. Even if you have passive income from other properties, they only count a portion of that income towards qualification. My 850 credit score was also less important to a broker I spoke to and who felt I wouldn’t get qualified for a conventional 30 year fixed. Since I work in the motion picture business where you move around a lot from studio to studio, I can’t show steady employment with one single company for two or more years which means I may need to explore the world of private money. With that in mind, just like with conventional loan brokers, are there brokers who can find sources of private money I might want to check into?
Is this for owner occupied or non owner? Owner occupied, there are lots of mortgage brokers out there that can do alternate documentation. If it's non-owner for a rental property, there are numerous no income verification products available. Portfolio lenders are what you're looking for. @jay hinrichs is right, you aren't looking for the private money guy.
Stephanie
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