You may be considering going to B lenders for personal or financial reasons. However, there’s also this feeling of doubt, asking yourself whether going for B lenders is the right decision. Great work on the initiative to research before closing in.
Today, we’ll talk about the pros and cons of mortgage lenders to help you decide whether it’s the right choice for you or not.
What is a B lender mortgage?
Consider B lenders as the alternatives to A lenders or banks that go along with their strict credit score requirements, financial history, income, employment stability, and the list goes on. The label “alternative” means you get to bypass these strict requirements and be able to buy your dream home. However, they will not be generous with their interest rates.
B lenders are quasi-regulated lenders who are not directly controlled by the federal government but are subject to rules indirectly due to the nature of their operation.
- Offers clear and tailor-made solution
Unlike A lenders that typically have established their mortgage rates, B lenders offer tailor-made solutions to clients. Depending on your income status, high debt servicing ratios, previous mortgage arrears, and credit rating, B lenders can work things out for customers and give them rates that are a good deal on their part.
So, whenever you shop around for B mortgage lenders, they don’t typically publish their rates publicly. Feel free to ask around and tell them about your financial situation.
- Typically funded short-term
Mortgage loans from B lenders typically span 1 to 3 years (rather than five years), allowing the borrower to improve their financial situation in the future and simply migrate back to regular loan sources without incurring significant penalties.
- Less strict when it comes to requirements
In contrast to A lenders, B lenders look beyond your credit scores and would rather want to hear your story. If your debt-to-ratios and overall financial situation are reasonable enough, they will make documentation out of it and get you to qualify for a loan.
- Typically comes with higher interest rates
One of the greatest downsides of B lenders is that they typically come with higher interest rates. This is because your borrower profile is considered riskier than average, and their offer is usually short-term. You might want to think about it deeper.
- May have multiple fees required upfront
A commitment fee or lending fee is frequently levied upfront. While they frequently provide excellent prepayment options, they do charge a slightly expensive fee for paying off your mortgage early, so make sure you understand them well.
- Stricter missed payments
The B lenders are pretty rigorous about missed payments, so you must be cautious about paying on time, or you must notify them immediately of any problems so that they can work with you to remedy them.
- Requires higher down payment rate
Not only do B lenders provide higher interest rates, but they also charge higher down payments upfront—15 to 35%. Before turning yourself over to B lenders, you might want to save up first and work out a plan.
The Bottom Line
Choosing which lender you want to take out loans from is a difficult situation. Make sure you research, ask around and consider your overall financial situation. If you’re reading this blog until this section, you just gave yourself a very good start. Make sure that you’ll read more.