Mortgage with private individual

[Anonymous]

I do not qualify for a mortgage through a lender, but have very good friends who are going to allow me to privately have a mortgage through them. We will draw up the proper paperwork with an attorney, and will have the loan privately serviced with a servicer who reports to the big three.

I'm just wondering how this might affect my credit score since it's going through a private individual (actually, an LLC they are forming for this purpose), and not a normal lender like a bank or credit union. 

Is anyone familiar with this type of scenario?

[StartingOver10]

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@Anonymous wrote:

I do not qualify for a mortgage through a lender, but have very good friends who are going to allow me to privately have a mortgage through them. We will draw up the proper paperwork with an attorney, and will have the loan privately serviced with a servicer who reports to the big three.

I'm just wondering how this might affect my credit score since it's going through a private individual (actually, an LLC they are forming for this purpose), and not a normal lender like a bank or credit union. 

Is anyone familiar with this type of scenario?

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I have worked with clients of mine that chose to obtain a private mortgage rather than go through a tradiitonal lender.

None of those private lenders reported to the CRAs.  So I am familiar with private financing but haven't seen those lenders go the extra step to report the payments. In your case it should be a real benefit on your credit reports. Usually it is a benefit to the buyer to be able to buy the property, but they don't have the credit score benefit at all.  Kudos to you for finding a very good friend that is willing to go the extra mile for you.

[Gunnar419]

I have had private mortgages a couple of times. They are common with fixer upper houses where the seller carries the financing because a bank will not. But they're often done in circumstances like yours, also.

As StartingOver says, these loans rarely, if ever report to the CRAs and therefore have no effect at all on your credit (unless you default and they get sent to a court or to collections, which isn't going to happen, right?). The bad side of not reporting, of course, is that you''ll always have a slight ding on your credit for not having a mortgage and the loan won't help you build your credit history. But it's a small effect. Many of us have scores in the 800s with no mortgage.

It's very wise of you and your friends to treat this exactly as any professional business transaction. That can prevent a lot of problems down the road.

[Anonymous]

Thanks everyone! It'll be interesting to see how this affects my credit score in a few months.