It is often seen that after being turned down for a mortgage or home refinancing by a regular bank or financial institution, borrowers tend to turn to private lenders for private mortgages as a backup source of funding. These are short-term, interest-only loans with typical terms ranging from six months to three years. The private lenders are aware that banks and other traditional financial lenders can often reject applicants who are more than capable of repaying their mortgages due to their excessively strict lending criteria. This is why, the private lenders, unlike that of the banks, give more weight to the overall condition and worth of the property than to the income and credit history of the borrower. This is one of the biggest benefits of private mortgages that in comparison to regular banks, private lenders also do not require as much documents.

Private mortgage lenders offer loans to those who would not qualify for conventional bank financing. Typically, these lenders have higher borrowing rates and sometimes even come up with tougher terms in comparison to traditional lenders. The most common examples of the private lenders include a number of private trust firms and credit unions. 

For someone who almost satisfies the requirements of an A lender but may need some time to either raise their income and net worth, improve their credit, or acquire a larger down payment, a private mortgage is the best short-term option.