Getting approved for a mortgage can be a challenge—especially if you have bad credit. Traditional lenders often turn down applicants with low credit scores or offer unfavorable loan terms. Fortunately, private mortgage lenders offer an alternative. If you’re exploring this option, it's important to understand private mortgage loan rates and what you can expect when applying with less-than-perfect credit.

At Sunlite Mortgage, we specialize in helping people secure mortgage solutions—even when traditional banks say no. In this post, we’ll break down how private mortgage loans work, what kind of rates to expect, and how to navigate the process with bad credit.

What Is a Private Mortgage Loan?

A private mortgage loan is a loan funded by private lenders or investors, rather than traditional financial institutions like banks or credit unions. These loans are often used when a borrower doesn’t meet the strict requirements of traditional mortgage lenders—usually due to issues like:

• Poor credit history

• Self-employment income

• High debt-to-income ratio

• Recent bankruptcy or foreclosure

Private lenders are more flexible and focus more on the value of the property than your credit score. That’s why they’re a popular choice for borrowers with unique financial situations.

How Bad Credit Affects Your Mortgage Options

Bad credit usually refers to a credit score below 620. While banks typically deny loans to people with scores in this range, private lenders take a broader view. They look at:

• The amount of equity in the property (or your down payment)

• Your income and ability to make payments

• The property’s market value and condition

While this means more people can qualify, private mortgage loan rates for bad credit borrowers tend to be higher than rates from traditional lenders.

What to Expect from Private Mortgage Loan Rates

1. Higher Interest Rates

One of the most important things to understand is that private mortgage loan rates are generally higher—especially if you have bad credit. While traditional mortgage rates (for those with good credit) may range from 4% to 6%, private mortgage rates for bad credit can range from 7% to 12% or even higher, depending on your risk profile.

This higher rate reflects the increased risk that the lender takes on when working with a borrower who has a low credit score.

2. Shorter Loan Terms

Private mortgage loans typically come with shorter terms, usually ranging from 1 to 3 years. These loans are often considered short-term solutions to help borrowers rebuild credit or refinance later into a traditional mortgage.

3. Lender and Broker Fees

In addition to interest rates, be prepared for additional fees such as:

• Lender fees

• Broker fees

• Legal and appraisal costs

While these fees can vary, they’re usually higher than what you’d find with a traditional mortgage. Always ask for a breakdown of fees before signing any agreement.

Tips to Get the Best Private Mortgage Loan Rate

Even with bad credit, there are steps you can take to secure better terms:

✔️ Provide a Larger Down Payment

The more equity you can offer upfront, the lower the risk to the lender—which could help you get a lower interest rate.

✔️ Show Stable Income

Providing documentation that shows a consistent income stream reassures the lender of your ability to make payments.

✔️ Work with a Trusted Mortgage Broker

At Sunlite Mortgage, we work with a wide network of private lenders to help find the best private mortgage loan rates for your situation. Our team helps you compare options, understand the fine print, and avoid predatory lenders.

When a Private Mortgage Makes Sense

A private mortgage loan may be the right choice if you:

• Need fast approval and funding

• Are recovering from a financial setback

• Are self-employed with non-traditional income

• Want to consolidate debt using home equity

Private mortgages can serve as a stepping stone toward rebuilding your credit and eventually qualifying for a better rate with a traditional lender.

Final Thoughts

If you have bad credit, don’t give up on homeownership or refinancing options. While private mortgage loan rates are typically higher, private lenders provide the flexibility and fast turnaround that many borrowers need.

At Sunlite Mortgage, we understand that life doesn’t always go as planned—and your credit score shouldn’t stand in the way of achieving your real estate goals. Our team is here to guide you through your mortgage journey with transparency, experience, and trusted support.