Buy Your Dream Home Using a Private Money Lender
For many Americans, the surefire way to build wealth for yourself, and your family, or to establish a personal savings, is to own a home.
Is there an exact dollar amount for what home ownership is worth? In point of fact there is. $195,400: that’s the net worth of the average homeowner versus the average net worth of a renter ($5,400).
But for most people, buying a home is complicated. A mortgage payment is made up of many interlocking parts that take into account property taxes, insurance, and interest rates. When you do apply, lenders will want to see how your income compares to your debt. Meanwhile, banks will do their own calculations based on whether your credit score flags you as risky borrower.
When Conventional Lending Goes Wrong
Unfortunately, all of that sticky math helps explain why 1 in 8 mortgage applicants are denied. Sometimes people aren’t as prepared as they thought, or the math doesn’t work out for conventional lenders.
As mentioned, one of the issues with conventional lending is that banks take into account so many different, and interlinked factors. For example, whether you qualify for a home loan depends on the kind of property you’re looking to buy, how much of the down payment you can afford and what your reserve income looks like after your down payment. In addition, banks will look at whether you’re making the minimum payments on your credit cards, and even how your debt fluctuates from year to year.
With all that math, there’s no way banks can get it wrong, right? On the contrary; just because a bank doesn’t approve you for a home loan doesn’t mean you can’t afford it. An analysis on subprime loans back in 2004 from the First American Loan Performance found that 41 percent of all subprime (bad credit) borrowers should have qualified for a prime-rate (good credit) loan.
This makes purchasing a home confusing for some borrowers. A credit score is especially critical, since your score will determine what type of loan you can apply for to begin with.
Why a Private Lender?
Is it possible to overcome these credit and finance hurdles? Yes, and that’s where a private money lender, like Wildcat Lending, come in.
Wildcat uses their own internal metrics, rather than traditional formulas, to structure loans for people that want to buy a home. Mortgage payments are divided into several components, but the most critical payments you make to the bank through a conventional loan is the principal, and interest. The combination of the two is what often makes it difficult for some to afford. However, with a private lender, monthly payments rely solely on the interest rate of the loan.
As a result, using a private money lender means softer monthly payments, and shorter repayment terms. A repayment term to a bank can take between 15 to 30 years. Through a private money lender, that interest can be paid down in 3 to 5 years.
Another important factor is getting approved in a timely fashion. Banks will want to know everything about your financial history. That includes knowing how long you’ve worked at your current job, whether that current job is similar to your work history, if you’re a W2 employee versus a 1099 contractor, and even whether you receive bonuses from your current employer.
As you might conclude, this could lead to “false positives.” Just because you’ve worked different jobs in a short amount of time doesn’t automatically make you a potentially unstable borrower. Because private lenders don’t use a formula they must abide by, companies like Wildcat can focus on your specific situation rather than compare you to an excel file.
Your Home Work
Before you start dreaming about BBQ’s and bowl games, make sure to do your homework first. Buying a house is an honest investment. Where you live will determine how you raise your family, the schools your children go to, your commute to work, and the wealth you can use to leverage into more wealth (it’s hard to do AirBnB inside a cramped apartment, after all).
This isn’t a football game, where all you need to calculate is your ticket, a greasy hot dog, and overpriced beer. A house requires a calculation on your mortgage, insurance, taxes, utilities, closing costs, and a down payment.
Places like Wildcat offer to make the process easier for people who aren’t aware of the options they actually have. Along with the general process of more quickly receiving a loan, Wildcat also offers “bridge loans” for those looking to transition from one home to the next, and their services also match you with investors that fit your financial needs.
Contact us for more on what Wildcat has to offer.