REO & Private Financing
Can someone help clarify this ad for me? "Need private financing on prime real estate, secured by 1st trust deed mortgage paying 12% interest !"
What is a 1st trust deed on private financing?
The type of financing the advertisor is looking for is private, likely they have credit issues or something like that that would either disqualify them for bank financing or possibly they have applied at the bank and qualified for a higher interest rate. So they are shopping around for a more affordable rate.
The "1st trust deed" part means that there are no prior mortgages on the property. Or that the private money loan would pay off the other mortgages and such so that the new loan would take first position.
I provide this same service, and can offer my perspective as well. If you would like to learn more about this please check out****Must Reach Freshman Investor status before posting URL's***
John is called the grandfather of private lending. What we do is purchase homes 30% + below market value or ARV (After Repari Value), we rehab the homes and put tenants in the home under a Lease / Option contract. The home are financed with funds from private lender who receive in return anywhere from 8% to 15% simple interest on there investment. The Private lendors investment is secured by:
1st Mortgage – Investment is secured by a first recorded mortgage.
Promissory Note – Legally Binding Note which pledges a single family house as collateral, at no more than 70% of appraised value, signed by me.
Hazard Insurance Policy – Investor will be the loss payee on the insurance policy.
Clear Title – Lender’s Title Insurance
I hope John's web site and the explaination are helpful.
John? Who is John?
Private Mortgage Lending really came into its own prior to WWII in and around Beverly Hills California. The first of such companies was Foster Mortgage Co. They usualy charged an interest rate of 10% and a commission of 10% and a prepayment penalty of 6% and wrote paper for three years as standard. In 1945 the next one in line was Gould Mortgage Co. also on Wilshire Blvd. and in Beverly HIlls. They gave a little better deal as the Private Lender to whom they sold the Mortgage aka Trust Deed got the late charges and the pre payment penalty.
To obtain one of these seconds as a Borrower your costs were $25 for an appraisal, $200 to $400 for escrow and title insurance policy or an abstract from Realty Trust Co. The standard commission charged by the Mortgage Co. was 10% but went up if there were hazards, like if the L/V was above 70%.
Then in 52 came Reliable and in 54 Superior and away it went.
First law suit for usuary was filed against Reliable Mortgage. The Judge Ida Mae Adams, then in her late 60s slept thru the trial until close to summ up. She woke up, looked at a note which had been presented in evidence and in shock said, "Ten Percent!" and glared at the attorney for Reliable. Yes her verdict was against Reliable. The owner of Reliable Mr. Gold, threw up. I helped clean up.
This was the real beginning of present time hard money. But then of course we have always had Vigarage. "Street Money".
They were interesting times, I learned a lot and have spent many years unlearning what I view as the Gonif's way.
Lucius
I also use private lending and sometines the same ad. I don't have credit issues, the reason is for ease. It is so much easier to have private lenders lined up to fund. Lenders take their tiime, but private lenders are always there, ready to go, no problems. I would suggest everyone use them.
Good Post Sunre:
What people dont realize is that when you are doing volume, time is of the essence! Also, it is a full-time job from my experience trying to get a conventional type loan closed. Especially when the appraiser marks down the kitchen cabinets are missing, needs a new roof, etc.... The underwriter freaks out!
What has your experience been?
Best Riches,
Jeffrey Adam
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