Mortgage lenders come in many varieties in the world of loans. Many borrowers are unaware of these variations.
They can be divided into three categories:
1. From “A Lenders”
2. Alternative lenders, or “B Lenders”
3. Loans from private lenders
Mortgage “A” lenders
include the traditional banks and financial institutions that most people bank with. Many borrowers turn to these mortgage lenders if they are considering a mortgage approval, and not only because of their low rates, but also to the fact that they have trust in these lenders. A number of “Alternative A” mortgage lenders also offer products that are very competitive with those of banks and can sometimes provide customers with better rates. Typically, these institutions operate as “Monoline Lenders”, which essentially means they offer only a limited range of banking services, and are not full service banks like the 5 major banks. Regardless of the type of mortgage lender, these types of lenders are the best ones when it comes to rates. When it comes to securing loans through these types of lenders, it is important that the applications of the applicants be polished and demonstrate low risk as well as great credit and proven income. To protect the interests of these banks and institutions, most of these mortgages are also insured. Considering that the respective insurance firms are in the business of maximizing premium collections and minimizing claims, they are also seeking applicants with a low risk of a claim.
Some A lenders are: Scotiabank, Bank of Montreal, CIBC,
Mortgage “B” lenders
There are several non-banking institutions involved in the “B” mortgage market that deal almost exclusively with mortgages. When it comes to mortgage approval guidelines, these types of lenders are less strict than A lenders. Therefore, even clients with poor credit or income below what banks require can receive mortgage approval. Due to the limited mortgage lending limits, these mortgage products require a down payment of at least 20%. The requirement for insured mortgages over 80% loan-to-value, coupled with the fact that insurance companies rarely insure higher risk borrowers, have led to most “B lenders” only offering uninsured mortgages up to 80% of the purchase price. Additionally, these lenders typically charge higher interest rates for their mortgage products because they take on more risks than mainstream lenders. Current market conditions see these rates starting at 1-3% higher than the “A” side.”
Mortgage “Private” lenders
Mortgage lenders who lend to the private sector are typically equity-based. Lenders, therefore, are more interested in the equity available in the home than they are in the income and credit of applicants (to some degree). Despite this, private mortgage interest rates tend to be much higher than those offered by other lenders. Those who require short term solutions for a variety of reasons can also apply for a second or third mortgage from private lenders.
Some mortgage lenders may seem more attractive than others, but their guidelines may make getting approved impossible. When it comes to mortgage financing, we approach every application with your best interest in mind, so we can help you navigate the mortgage market with ease!