Challenges With Private Mortgage Shopping
“Private Mortgage Options Can Be Destroyed By Excessive Shopping”
When it comes to private mortgage shopping for rates and terms, its something you need to be a bit careful with if you can.
In the world of residential mortgage financing through a bank or institutional lender, rate shopping is broadly accepted due to 1) the competitive nature of the market; 2) high deal volume; and 3) the relatively small amount of work and time it takes to process an application.
In many cases, the mortgage broker will enter the information in online and the lender’s computer system will spit out an offer for financing.
But with private mortgage lending, this is a different deal all together.
Private lenders are many times single individuals with funds available to invest in the mortgage market.
Because both their funds and time are limited, most will focus on deals that not only fit their lending and funding requirements, but also are ready to move forward to closing.
In many cases (certainly not all) when a private lender receives multiple applications for the same deal, there is a good chance that the private lender will decline the application and move on to the next one.
When its obvious a deal is being broadly shopped, many private lenders will pull out of the running and spend their energy on applications where they believe they have more exclusivity to the deal, or at least feel that there are less other lenders involved.
Let’s further explore how this happens in the first place.
Most mortgage brokers do not have direct access to private lenders and instead try to access private money through their network and other mortgage brokers.
The result is that several brokers get involved and start sending the application around to many of the same private lenders.
Therefore, its important that an applicant for private mortgage lending is making sure that their application is not crossing paths as much as possible so that otherwise good lending sources and options don’t disappear on them.
There are a couple of ways to do this.
First, make sure that you are dealing with a private mortgage broker who has direct access to private lenders. Instruct your broker to only contact private lenders directly and not engage additional mortgage brokers.
Second, if you want to utilize more than one mortgage broker, engage them one at a time. If a broker truly has direct private money sources that are interested in the deal, he or she should be able to come up with a term sheet for you in three to five business days. If they can’t, then they don’t likely have any direct access and are just hunting around, trying to find a private lender for you.
So you don’t have to provide exclusivity for very long. If you aren’t getting anything back from your broker in a week or so, then consider another private mortgage broker. If the deal ends up crossing paths it shouldn’t matter as any lender that will see it more than once will have declined the deal the first time around anyway.
If you are in need of a private mortgage for residential or commercial property, give me a call so I can quickly assess your requirements and provide private mortgage financing options from my direct lender contacts for your immediate consideration.
Click Here To Speak With Toronto Private Mortgage Broker Joe Walsh