Private Money Lender Requirements

5 Replies

"Private" money lender refers to a personal contact, not a bank or group of investors. It's your neighbor, parents, uncle, brothers, friend. Their terms are whatever you two agree on, frequently less expensive terms than a hard money lender. A hard money lender will certainly require your SSN and sometimes your firstborn.

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I hope you’re asking, @Andrea Hunter, because you’re dealing with a lender you know for certain is 110% legitimate and you simply wonder why they want an SSN.  You are not asking because this is your way to determine, in part, if a lender is legitimate, are you?  It is not.

Contrary to the occasional uninformed dogma you read here on BP, the terms Private money and Hard money are one and the same under the law.  They both refer to non-conventional money (i.e. not a GSE like Freddie Mac or Fannie Mae who might buy or guarantee a loan from BofA).  In fact, Private and Hard money are really just marketing terms.

The reason it's important to understand this is because some here apparently think cynically that even though most Private/HML terms are variable or negotiable, HML's are somehow stricter or more demanding and it's ok for a Private lender to skimp on the paperwork. It is not.

If your lender, be it a large HML at a fancy address or your Aunt Edna, is wise and acting professionally they will have a loan documentation package that includes a 1003 URLA or equivalent that requests your financial info, including a SSN. This makes it easier for lenders that do it to check your credit, understand your assets, collect on unpaid debts, and several other protections that Aunt Edna might not care about. But what if Aunt Edna wanted to or had to sell her loan? Or, defend it against a desperate borrower. Wouldn't proper documentation by someone who knew what they were doing be easier to sell or defend?

Long answer but there are lots of legitimate reasons to ask for a SSN.  Just be careful you know who you are providing it to and always ask how they will protect your personal info.

Good luck, Andrea.

Originally posted by @Andrea Hunter:

Does anyone know the information needed when filling out an application for a private money loan from a lender? Also do they require your Social Security number?

Asking for your SSN is pretty standard. And a copy of your ID. And if you are not a US citizen, your Green Card. And if you are also asking for a preapproval letter, for what that's worth, we want a copy of your bank account statement.

Your SSN will be used to hard pull your credit score. It will also be given to the Title company for your loan.

If you are concerned about identity theft then consider asking others in the real estate investing world that you know, for referrals to HMLs that they use. We for instance get a lot of referrals from people who have come to know and trust us.

Cheers. 

Originally posted by @Andrea Hunter:

Thanks David for your response. so, to make sure I have it correctly a social security number is required.

 That's 100% up to your cousin or friend or whatever. It's not up to any of us.

Keep in mind that a common HML marketing ploy is to call themselves "private lenders." That's a lie. If a HML is starting off by lying to you, that should tell you everything that you need to know.