Private money comes in many different flavors. Have you ever really thought about how Real Estate lending works through the products that are available? Yes, a product is an apt description because when a loan program is designed, it is created to sell, just like anything else such as a Hamburger at Jack In the Box, a perfume scent from Este Lauder, or a new kind of car such as a Hybrid or more recently an all electric vehicle.

Lets make it simple but still comprehensive.......

Loan Programs Demystified by product type and lending source:

BANKS:

Banks borrow money from the feds from the "Discount WIndow" currently at .75%. 

Yes, that is all the money costs them. So when you think you are getting a great deal paying a 4% rate, just know the banks are making 3% off of you. No wonder their rates are so low. 

Mortgage Bankers:

Mortgage Bankers borrow money from the Banks and get a wholesale rate and receive a rebate or a front end fee to put borrowers together with their money. Mortgage bankers make their money through charging fees to borrowers to arrange their loans and get "rebates" of 1-3% for selling the bank money. The higher your interest rate, the bigger their rebate or commision becomes. 

Private Lenders (LIKE ME)

Private lenders raise their loan money through either a mortgage pool they sell shares of or through deeds of trust. For the pool, investor usually make between 6% and 8% so when a private lender charges 9% and 3 points, they are not only making a 3% fee, they are keeping a spread of 1-3% on the interest rate. When private lenders sell loans to trust deed investors, they normally only keep the points and maybe a .5 to 1% spread called a servicing fee on the money. 

Of course their is far more to it than that  but at least maybe now you know why loan rates vary so widely and you can make an informed decision as to how much lenders make off of you and your business. 

 Got a deal? Submit it in 5 minutes right now.

SUBMIT A LOAN IN 5 MINUTES HERE
 

1) SECOND loans on Res/Commercial up to 75% CLTV starting at 9% interest.

2) LAND loans up to 60% LTV up to $7 million. 

3) Nationwide Residential 1-4 and apartment building loans starting at 6.25%. (75%!)

4) JUMBO first loans up to $25 Million! (75% LTV starting at 9% and 3 points!)  

5) FARMLAND (Nationwide)

6) BUSINESS LOANS: Factoring (receivable Finance) & Equipment too

That is the gist of it for this month. Remember if you are a broker or even a borrower that is looking for that needle in the haystack, do yourself a favor and give me a call.  

Where do we get our money? We work with trust deed investors, and we are a correspondent with wholesale lenders. 

Interested in Deeds of trust as an investor? All you need to know is right here.

 Finally, our informational blog  is a great place to learn about self directed iras, market data, and a variety of other real estate educational programs.