(Yes there’s more than one)
You may have heard (or maybe you haven’t) that there are multiple sources you can use to get your financing for a home.
Who are these sources you ask? Let me fill you in on them.
Banks / Credit Unions – These are obviously the first ones that come to mind as you see them all around town. They are certainly options to consider.
Monoline Lenders – Mono who?? Monoline lenders are lenders that just do mortgages. They do not offer bank accounts, credit lines, credit cards, investment products or anything like that. Given that they only provide one product and do not have physical locations for you walk into, they are able to offer better rates and terms to exit. Some examples of monoline lenders are: First National, Street Capital, and Merix Financial. Not to worry, theses lenders are carefully watched, and you are 100% safe with them
The above 2 types of lenders are sometimes referred to as A lenders. This is due to the fact they have the best rates and terms for the mortgage products they offer. There is another set of lenders who are referred to as B lenders.
B Lender – what is that? Well they are lenders that would be able to assist people who would not fit into the A lender space. One common group of clients they assist is self employed individuals. Clients who are making money but writing down their income to save on their tax bill. These people do not always have the verifiable income required by the first 2 types of lenders. The B lenders would look at such things as bank account statements to ensure that there is enough cash flow to service the mortgage. They may also look at rental income within a property, that the A lenders may not, to help with servicing the loan.
As they are taking a more reasonable approach to income sources, they are also taking more risk. This means that when dealing with these lenders you would usually require a minimum down payment (or equity in a property) of at least 20%. Also expect your rate to be approx. 2% higher (or more depending on the application) and a fee for their services. While this may not sound appealing, they do help clients everyday and are the right options for a lot of people. There is no prize for the lowest rate and it can make far more sense to pay the higher rate and the lower tax bill.
Lastly there are private lenders. They are able to assist clients who are:
• trying to get their credit restored
• builders who require short term funds to finish homes to sell
• clients who find value in properties and would like to flip them for profit
Their rates, depending on the deal, would start in the high single digits and move up from there. You will always see a fee associated with this type of lending as it is usually supposed to be short term.
“Nothing is impossible, the word itself says I’m possible”