Bank/Conventional or Residential Mortgages also referred to as ‘A’ Paper, is the ideal situation for any borrower with good income and good credit. Such a borrower is considered an ‘A’ or a prime borrower. A prime borrower gets the lowest rates, mostly no lender fees, and extended terms. However, this is becoming more and more uncommon in today’s market due to very strict qualifying guidelines and the recent Stress Test that was implemented in Canada. Credit needs to be super good, and income needs to be strong and verified. Total debt ratios can absolutely be no more than 44% and even that is with other compensating factors. If you do not qualify with an ‘A’ lender, your mortgage request is often pushed to the ‘B’ side.
‘B’ or Alternative Lending or sub-prime financing is not by any means a slam dunk approval. ‘B’ lending also requires income verification but the total debt ratios can go up to 48%. In some cases to 50% or even more with compensating factors. The good news is that your credit score can be as low as 500. ‘B’ lenders can also use bank statements to qualify self-employed borrowers, or even just two months’ payslips and an employment letter for salaried borrowers in some cases.
‘B’ lenders offer lot lower rates than Private Mortgages. Private Money Mortgage Brokers come to your rescue if you are turned down by the Banks and the Alternative or ‘B’ lenders. However,it does come with a price. Private Mortgage Lenders or Investors are what we call common sense lenders, and they do not have any specific guidelines to follow. If there is enough equity in the property and a strong exit strategy, they can usually fund the mortgage. Because these lenders are taking on a higher risk, their rates and fees are higher, ranging from 7 to 10% for a 1st mortgage, and between 9 to 18% for a 2nd mortgage.
Private Mortgages are also known as band-aid loans as these are short-term mortgages that help you buy time to improve your credit and income situation. So use the time that a private mortgage buys you to improve your credit score, otherwise a year will go by before you know it, and you will end up paying the same high rate again. A Private Mortgage Broker can help you in improving your score. If you have any questions or if you need a Residential, Alt-A or “B’ Lendingor Private Mortgage, contact us today and we will find you the right mortgage.
Jeet Singh is a writer and also a Mortgage Broker with over 25 years of mortgage experience. He can be reached at 778-320-9494 or [email protected]
Copyright © 2018 - All Rights Reserved Designed and Maintained by Enanto Designs