Traditional banks have a standard policy for granting mortgages. Usually, banks consider the credit scores and history of mortgage borrowers before granting a mortgage. Conversely, private lenders grant mortgages to mortgage seekers while mainly considering their property’s equity than credit scores. Primarily, private lenders look at the Loan to Value Ratio before they consider anyone for a mortgage. Contacting a mortgage broker in Oakville can help mortgage brokers find private lenders for mortgages suiting their requirements. Besides, finding lenders on your own is stressful and time-consuming at the same time.
When Aren’t Traditional Lenders the Right Option for a Mortgage?
Homebuyers who want to buy a home in Oakville need to go through mortgage pre-approval. Mortgage brokers or traditional lenders, such as credit unions or banks, can help mortgage borrowers go through this stage. Mortgage pre-approval also uncovers how much money mortgage seekers can potentially borrow for a mortgage. Then, mortgage borrowers can combine that amount with their down payment to find out the maximum purchase price. Unfortunately, traditional lenders have strict restrictions on mortgages. Hence, getting mortgages through these institutions becomes impossible for mortgage borrowers at times. In such a situation, seeking private lenders is the best option for homebuyers to get a mortgage.
When Should Mortgage Borrowers Seek Private Lenders for a Mortgage?
Private lenders are either small companies or individuals that also offer mortgages besides traditional banks and credit unions. Mortgages that private lenders provide are also a little different than mortgages you may get from traditional lenders. Usually, private lenders provide short-term mortgages with a length that can vary from six months to 2 years and 5 years. Additionally, the duration of the short-term mortgage also varies from no minimum to a 15 years minimum. Mortgage borrowers have to pay the interest that accumulates on the debt during the duration of a short-term mortgage.
Furthermore, a mortgage broker in Oakville can help you find a private lender for a mortgage if you struggle to qualify for a mortgage through a bank. Mortgage borrowers can also apply for traditional mortgages in Oakville directly through a bank or via a mortgage broker. However, traditional lenders only grant mortgages to people with good credit scores, reliable employment income, and a 5% down payment. Seeking a private lender may make sense in the following scenarios:
- When you want to purchase an unconventional property
- If you need financing promptly and can’t wait for the approval process
- When you have bad credit or no credit
- If you need a short term loan to refinance when the term is up
- When your income isn’t verifiable
How Do Private Lenders Differ from Traditional Banks and Credit Unions?
Private lenders and traditional banks or credit unions differ in the following ways when it comes to mortgages:
Traditional lenders follow a standard policy for interest rates to grant mortgages. Conversely, private lenders usually charge higher interest rates to mortgage borrowers while granting them mortgages.
Many traditional mortgage lenders have fees for granting mortgages. On the other hand, private lenders charge 1 to 3 percent fees based on a total mortgage.
Most private lenders offer short-term mortgages, but some offer long-term, too. Traditional lenders provide the long-term mortgage.
Private lenders rely on the value and marketability of a property while granting mortgages. Contrarily, traditional lenders focus on a credit score and financial profile before granting mortgage
Questions to Ask Yourself While Evaluating a Private Lender
- How high is the interest rate for a mortgage?
- What are the penalties if you miss a mortgage payment or get out of a mortgage early?
- Can you make a lump sum payment or prepay your mortgage?
- What is the monthly mortgage payment, and is it affordable?
- What fees do you need to pay to get a mortgage?
It’s impossible for mortgage seekers to get a mortgage from traditional lenders with a bad credit score. However, mortgage borrowers may need to get a mortgage to invest in a property despite their bad credit score. In that case, they have the option to acquire a mortgage from private lenders. Additionally, a mortgage broker in Oakville, like Patrick Romann, can help such mortgage seekers acquire a mortgage on suitable terms. Lastly, mortgage borrowers should initially consult with a mortgage broker before they seek private lenders for a mortgage.