One of the biggest misconceptions of using mortgage brokers is that brokers place their residential mortgages with private lenders and not banks. Have you heard of this before?
Well, of all the mortgages I’ve completed in my 12+ year career as a mortgage broker in Edmonton, 99% of mortgages I’ve worked on are with residential mortgage lenders that are either banks or other ‘A’ lenders.
I think this is where the rumour started about mortgage brokers only using private lenders. There are three primary types of residential mortgages lenders borrowers are placed with and because of how they are labelled, it can cause some confusion.
What are the Different Types of Residential Mortgage Lenders?
‘A’ Lenders are your big name Banks, Credit Unions, and Monoline lenders. Most of my first-time home buyers fit into this category. You have little debt, good income, and good credit.
The big name Banks in my broker channel are Scotia, TD, and ATB. Brokers in Alberta can also deal with Servus Credit Union and First Calgary. There are different Credit Unions that brokers have access to in other provinces.
Monoline residential mortgage lenders focus their portfolio only on mortgages. There are a lot of benefits in using a monoline lender. Because their sole focus is mortgage related products, monolines offer more flexibility in penalties and prepayment privileges.
Several monoline mortgage lenders have Schedule 1 bank status and they are secured by Canada’s Mortgage Insurers; CMHC, Sagen, and Canada Guaranty.
Examples of monoline mortgage lenders are MCAP, Street Capital, First National, and Merix.
‘Alt A’ or B Lenders
This is where I think many people believe they are getting a “less than” mortgage product because of the name. Alt A or B residential mortgage lenders are still Schedule 1 banks in Canada. Their products are geared to help borrowers that have harder to prove income.
These borrowers include self-employed business owners or borrowers that may have bruised credit. Or borrowers that have high debt ratios and therefore don’t meet the ‘A’ lenders guidelines. They often require a higher down payment for their mortgage products, typically 20% minimum.
The Alt A lenders that I deal with are Canadian Western Bank, Equitable Bank, Bridgewater Bank, and Haventree Bank. I also have a few newer Alt A lenders that have been added to my channel so there’s almost always an option for my clients!
The final type of residential mortgage lender is private lenders. These lenders are mortgage investors who are investing their own money to fund mortgages.
Private lending is usually the last resort for borrowers. They are in a difficult credit situation or they do not fit in the ‘A’ or ’Alt A’ lending guidelines. Because there is private money involved, interest rates are usually higher and terms are much shorter.
The majority of my clients, especially first-time home buyers, qualify for A type lending. If they don’t, we’ll put together a plan to get them into the qualification range for A or Alt A lending.
Advantages of Working with a Mortgage Broker
It is so easy to get overwhelmed searching through all the types of residential mortgage lenders in Canada. I alone have over 35 I can access…can you imagine trying to sift through all the options by yourself!?
You’re Getting the Best Residential Mortgage Lenders Option
When you’re working with a mortgage broker, you’re working with someone who already knows where the best rates are and the best package to suit your needs. You don’t want to lock yourself into a mortgage that has you paying super high fees if you need to make a change!
You’ll Get Someone Working On Your Behalf
Often the success of obtaining mortgage approval depends on the way a mortgage application is presented to the lender. I work directly with the person who is going to say yes or no to your application. I’m here to help put you in the best position for getting a yes without having to jump through a ton of hoops.
You’ll Get Answers Quick
Typically, I’m getting an answer within a day or two…something you’re not likely to get by doing it yourself. In this market that we have right now, you need to get your application approved quickly to secure your new home.
Finally, You Don’t Pay Me!
My services are free. Yup, that’s right! Your lender pays me once your mortgage is funded and you’ve moved in.
Why wouldn’t you want an experienced professional to put together your mortgage application, submit it to the best lender, with the best options that saves money AND gets you into a home? Seems like a no-brainer!
My advice is don’t exhaust yourself trying to find the right residential mortgage lender. Shoot me a quick message or start your application, and leave the searching to me. It’s what I love to do!