When you’ve decided to buy a new home, whether you’re making the transition from being a renter to becoming a homeowner or you’re leaping into home ownership moving out from under your parent’s roof… The most important part of the process isn’t finding the right house to buy… It’s securing the financing you need to make that large of a purchase. Whether you’ve been saving through the years, or you have a nest egg of money that’s been left to you by a loved one, you’ll likely still need to secure a mortgage as well.
There are many ways to secure a mortgage other than the traditional approach many take sitting down with their bank. You might think that the bank would give you the best rate seeing as you’ve been a customer of theirs for years but, you’d be surprised as to how high and restrictive their rate offerings can actually be. Aside from the bank, you could use a private mortgage lender or an alternative mortgage lender. Regardless of what type of mortgage lender you decide to go ahead with, talking with an experienced mortgage broker first will help you best navigate your financial options while securing the mortgage you need.
What is an alternative mortgage lender?
An alternative mortgage lender is a non-traditional financial institution that provides home loans to borrowers who may not qualify for a mortgage from a traditional bank or credit union. These lenders often have more flexible lending criteria, such as accepting lower credit scores, higher debt-to-income ratios, or non-traditional sources of income. Alternative mortgage lenders may also offer specialized loan products, such as interest-only mortgages or adjustable-rate mortgages. However, these loans may come with higher interest rates and fees compared to traditional mortgage options.
Your bank as your mortgage lender…
When you first use a bank, you learn how to open a bank account, deposit money into your account, and you learn how to use a credit card close thereafter likely. As you get older, you learn that banks provide services well beyond your basic bank accounts. You can set up investment accounts, tax-free savings accounts, credit cards, lines of credit, RRSPs, mortgages, and so much more.
If you don’t get approved for a mortgage through your bank or a traditional mortgage brokerage, don’t sweat it. There are other options available to you but, you’ll need to put a bit more work into the process to make your dream of homeownership a reality.
These are a few options you might look at if you’re having a challenging time getting approved for the mortgage you need.
- You could get a co-signer to sign off on your mortgage for you. A person that you trust and have good credit.
A co-signer on a mortgage is a person who agrees to take on the responsibility of paying back the mortgage loan if the primary borrower is unable to do so. The co-signer is essentially a guarantor of the mortgage and is equally responsible for making the mortgage payments. The co-signer may be added to the mortgage application to help the primary borrower qualify for the loan, either because the borrower has a low credit score, insufficient income, or a lack of assets to meet the lender’s requirements. Co-signers are typically family members or close friends of the borrower, but they could be anyone willing to assume the risk of repayment.
- You could apply for a credit union mortgage
Using a credit union for your mortgage can have several advantages. Credit unions are not-for-profit financial cooperatives owned by their members, and they may offer lower interest rates and fees on mortgages in comparison to traditional banks. Credit unions may also have more flexible lending criteria, making it easier for borrowers with lower credit scores or smaller down payments to qualify for a mortgage. Additionally, credit unions often offer personalized service and a focus on member satisfaction, which may lead to a more positive home-buying experience. However, credit unions may have more limited branch and ATM networks than traditional banks, so it’s important to make sure the credit union you choose has convenient locations and online services that meet your needs.
- You could use a mortgage investment company (MIC)
A mortgage investment company (MIC) is a type of non-bank lender that pools investor funds to provide loans, including mortgages, to borrowers. While MICs may offer pre-approvals for mortgages, it’s important to carefully consider the terms of the loan and compare them to those of traditional lenders. MICs may charge higher interest rates and fees than banks or credit unions, which could make the loan more expensive in the long run. In addition, the lending criteria and underwriting standards used by MICs may be different from those of traditional lenders, which could affect the amount of financing available or the type of mortgage product offered. Before getting pre-approved for a mortgage with a MIC, it’s important to do your due diligence and understand the terms and conditions of the loan, as well as the reputation and track record of the lender.
- You could use a private mortgage lender for your mortgage
Using a private lender to get pre-approved for a mortgage can be an option for borrowers who may not meet the lending criteria of traditional lenders, such as banks or credit unions. Private lenders are typically individuals or small companies that provide financing for real estate purchases, including mortgages. Private lenders may offer pre-approvals for mortgages, but the terms of the loan may be different from those of traditional lenders. Private lenders may charge higher interest rates and fees, require larger down payments, or offer shorter loan terms. It’s important for borrowers to carefully consider the terms of the loan and compare them to those of traditional lenders, as well as to understand the reputation and track record of the private lender. Private mortgages can be riskier than those provided by traditional lenders, and borrowers should seek legal and financial advice before committing to a private mortgage to ensure that they know what they are getting into, what they will be on the hook for, and to make sure the contracts are properly constructed.
All of these mortgage options mentioned above often have a lot of fine print. The best choice you could make ahead of signing an alternative mortgage agreement is to call me, Darren Robinson, first. I’ve helped many individuals and families in Barrie and the surrounding area get approved for the mortgage they need while ensuring they have made sound financial decisions along the way while achieving their goals of becoming homeowners. And, in my opinion, no question, is a silly question. Buying a home is a huge decision and an equally huge investment. This is why it is important to take the time to meet with your mortgage broker to review your options, rates, and needs before deciding the best plan of action to take to secure the funding you need. If you’re looking at securing a new mortgage or your renewal date is around the corner please feel free to give me a call at 705-230-1306. I’m always happy to answer your questions while making the mortgage process as stress-free as possible.