Banks are usually the first place people turn to when looking for a mortgage.
But, when you have bad credit, they’re not so helpful.
If you have a credit score lower than about 600, you’ll need to get a mortgage from a B lender or private mortgage firm.
A lenders are the big banks. B lenders are trust companies, although, they’re more like A- lenders. Your credit can’t be that bad otherwise you won’t be able to get a mortgage with Trust companies either.
When it’s really bad, you need to go to a private lender.
So, how do you determine if your credit is bad?
Two major companies keep a tab on your credit score:
You can request copies of your score from them.
But, they charge you if you want it online, i.e. immediately. If you want it by mail, it’s free. How absurd!
First of all, I don’t want all that info being sent by regular mail. Secondly, shouldn’t it be the other way around?
Anyways, that’s how Equifax is doing it. I haven’t checked with Transunion.
Your score can be a maximum of 900. If you have a credit score of about 600 and above, then you probably can get a mortgage with a major bank. It’s not a guarantee, but, it’s just one of the important requirements.
When it’s below 600, you can try a Trust company. If it’s too low, they won’t provide you with a mortgage loan either.
Your next step is to try a private lender.
A private lender may be an individual, a group of individuals, or a company with lots of cash who can provide you with a mortgage when the bank or trust companies don’t want to.
They won’t lend money for everyone, they have limits as well, but, they’re your last type of lender that you can go to after trying a bank and trust.
You should note that you can try different banks if one of them declines you.
When I was younger and just graduated from university, I wanted to borrow $10k from my bank, TD. I got declined because I only worked less than a year. I showed them that I had $10k in my bank account, but, they still wouldn’t budge.
I ended up going to ING Direct (now known as Tangerine Bank) and I got the loan in about 10 minutes!
Now, a regular loan is not the same as a mortgage and the criteria or determining whether to lend to you or not is different. But, I would speculate that they may be a bit more flexible than the bigger banks.
So, no need to go immediately to a trust or private firm, if you get declined from one of the big 5 banks, try a smaller bank next
If the smaller bank doesn’t work out for you, then try a trust company, and finally a private lender.
This is where having a mortgage broker can really help and save you time.
Now, you probably already know some of the big banks and trusts. You’re probably wondering who some of these private lenders are.
I did a quick search on Google for “private mortgage lenders” and what I noticed is that the first couple pages are actually lists of mortgage brokers, not the actual lenders.
So, after delving into this more, what I learned was that most of these private mortgage lenders don’t advertise to the public. They use mortgage brokers to sell their products and services.
If you don’t know what a mortgage broker is, read my guide on mortgage brokers here.
And that’s why you’ll see mortgage brokers in the first few pages. In fact, I didn’t find an actual lender until the 4th page.
Many private lenders are not accustomed to dealing with the public from what I read. So, it’s best to use a reputable mortgage broker who can help you find a good private lender and broker the transaction for you.
Information on private lenders seems scarce. This is definitely an area where you want to use a mortgage broker. And you probably want to use one who actually specializes in this area, not just any mortgage broker.
Although I outlined above how you can do all this yourself, I would just look for a mortgage broker to begin with and save yourself the work.
Note that when using a mortgage broker for getting financing with a private lender, you’ll probably get charged for it. This is the one area where their services are usually not free.
You should also note that the interest rate that private lenders charge is much higher than the banks or trusts.
Are you planning to use a private lender? Comment below and let other readers know how it went. Information is scare and Mortgage Crunch would love to hear from you.