When you’re looking for a mortgage, there are plenty of lenders and options to consider out there.
Sometimes a person will ask you if your preferred money lender is an A or B lender. However, only a few know the difference. Most banks will call themselves A lenders and refer to the rest as B or private lenders.
The truth is, these terms have nothing to do with the lender’s size or quality. Or even the client’s profile. In this article, we discuss the differences between A lenders and B lenders in Canada.
A-lenders are traditional lenders such as credit unions and banks. Essentially, the group focuses on customers with a reliable source of income and high credit scores. Since these institutions are regulated by the federal government, approaching them for mortgage calls for a stress test. A-lenders have relatively strict criteria for all mortgage applicants.
That means that having a low credit score can significantly affect your mortgage interest rates. Most people seeking mortgages have traditionally approached these lenders.
Even these are the to-go-to mortgage options for most people, obtaining them can be tremendously time-consuming. That is because you need to fill out excessive paperwork, and the interest rates may be quite complicated.
The process of accessing a mortgage with an A lender can also be daunting since it may take several months before it gets approved. Compared to most financing options, A lenders seem to be the most challenging to obtain.
On the other hand, B lenders step in when A lenders cannot approve your application. That is why this lending option has gained so much popularity over the past few years. B lenders also tend to be flexible on credit. And rely heavily on the equity in the property in question.
A reason most people prefer B lender mortgages is that they are less stringent with their qualification guidelines. And are more lenient on issues, including debt servicing ratios, credit scores, non-conforming income sources, and different down payment sources.
When looking for B lenders, you need to go through mortgage broker channels. If they turn you down, private mortgage lenders can come in handy. They allow you to leverage real estate with a home equity loan. However, the option is generally ideal as a short-term mortgage solution.
Mortgage brokers can assist you in determining the right mortgage for you based on your situation. These professionals go over the financing options available and submit any required documents on your behalf. They may also help in negotiating the mortgage rates and terms.
With so many mortgage brokers in the market, finding the best one can be overwhelming. For this reason, you need to prepare a set of test questions to ask before you make a final choice. The best one should have your best interest at heart. And show commitment to helping you find the best mortgage option. They should also be professionals in this field, have the relevant licenses and certifications for operations, and help you seek the best B lender rates canada.