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“B” Positive About Alternative Lending

Alternative Lending Nathan Lawrence 24 Sep

Mortgage markets are historically geared towards the prime borrower, these are people with a squeaky clean credit score, solid income, and are considered to be able to easily repay their mortgage. However, not everyone is going to fit into that category but that doesn’t mean you won’t be able to get approved for a mortgage. There are a growing number of Canadians who are turning to alternative lenders. As lending guidelines tighten they are being turned away from larger lending institutions. These lenders are often referred to as B-Lenders, high risk lenders, or alternative lenders, and these types of lenders can be helpful to those that have been hit by bad credit, have recently divorced, fallen on difficult circumstances, or are self-employed individuals. Just because the bank declines an application for a mortgage does not mean that you as a home owner are out of options. Remain positive and visit your local mortgage broker, they will be able to connect you with lenders that consider and approve all types of mortgage clients, including those who may have recently gone through a bankruptcy or consumer proposal.

When applying for a mortgage with an alternative lender, the mortgagor is not going to receive the lowest rates; however, they will be provided with solutions to help a home owner get back on their feet until they can qualify to re-apply for a mortgage with a prime lender. It is not what you would consider a be all, end all, solution but rather a stepping stone to working on building up credit and personal equity. Usually a mortgage term with an alternative lender is shorter, this way the borrower is not stuck with high interest rates for a long period of time. After all, an alternative lender should be a short-term solution.

Alternative lenders will look at applications on a case-by-case basis and they will want to hear the whole story. For example, if you had to apply for a bankruptcy in the past they will want to know why. If you are self-employed alternative lenders will want to better understand the nature of your business and income.

Work with a mortgage broker that has experience helping people with tough mortgages. They should also provide advice and connections that will help you build towards being able to apply for a prime lender at renewal. A good mortgage broker and alternative lender don’t want to see their clients end up in a downward spiral of higher and higher interest rates as they fail to manage their credit. The main goal of any alternative lender is to get the borrower on their feet and happy about being a homeowner.