The Three Types Of Mortgage Lending

There are three primary types of lenders that are used in the mortgage industry - “A” lenders, “B” lenders, and private lenders. It is important for homebuyers to familiarize themselves with the different types so that they know which ones are best suited for them. Some knowledge about these lenders will also help homebuyers understand the criteria they need to meet to use a certain type of lender.

As an expert in the mortgage industry, Jordan St. Pierre-The Mortgage Centre has put together detailed information about all three lenders and the prerequisites to qualify for their mortgages.

1. What is an “A” lender?

An “A” lender is the term used for a traditional mortgage lender, such as a bank, credit union, and mono-line lender. These lenders focus on customers who have good credit scores, a reliable source of income, and a marketable property. They are also regulated by the government, and anyone who borrows from them is, therefore, subject to certain criteria such as the ‘stress test’ and AML (anti-money laundering) laws. The best-suited clients for an “A” lender would be those who have:

a. A credit score of 600 to 900

b. A debt to income ratio that falls within the permissible guideline (TDS and GDS)

c. A reliable source of income

d. A minimum down payment of 5%

2. What is a “B” lender?

“B” lenders are institutions that offer lending options to customers with weaker profiles that would not qualify for traditional lending. They offer a lower barrier to qualify for their products but offset this with higher interest rates and fees. Although these lenders are reputable in the field, it is very important for clients to understand the specific conditions of the mortgages they provide. This will ensure that they will not be in a situation of high-interest rates and unable to afford their mortgage payments. The best-suited clients for a “B” lender are those who have:

a. A credit score of 500 to 900

b. Unprovable or stated income needs

c. A Property in mind that is in a municipal setting (typically no rural allowed)

d. A minimum down payment of 20%, plus fees

3. What is a private lender?

Private lenders are unregulated mortgage lenders, who tend to be the last resort option for homebuyers in Canada. They typically offer mortgages based on the existing equity in your home rather than looking at your credit rating and income. Private lenders often require little in terms of qualification. But, their interest rates tend to be much higher than “A” or “B” lenders. As with “B” mortgages, it is essential to know the specific terms and conditions of the deal that an unregulated lender is offering. The best-suited clients for a private lender would be those who:

a. Have existing equity in a home already (no credit score requirement)

b. Do not meet “A” or “B” lending requirements

c. Have a minimum down payment of 20%, plus 2% to 3% in fees (typically 25% to 30% is acceptable in the Edmonton region)

If you are looking for a mortgage broker in Edmonton, Spruce Grove, Stony Plain, St. Albert, Devon, then reach out to me at Jordan St. Pierre-The Mortgage Centre. I have been providing mortgage financing solutions to the greater Edmonton area since 2013, and my goal has always remained the same - to ensure that every interaction is a positive experience for my clients. I provide clients with financing solutions that are tailored to their specific needs, goals, and future plans. Whether purchasing, renewing or refinancing, I take an unbiased and honest approach to mortgages that leaves nothing to chance. I have access to all three lenders and a broad range of mortgage products. I work in association with The Mortgage Centre, which is a national mortgage brokerage focused on delivering mortgage-planning services to Canadians and is one of the fastest-growing mortgage companies in Canada. With their outstanding range of mortgages and lenders, I am able to help more Canadians achieve their goals of homeownership and financial security. I offer mortgage services like home purchase mortgage, first-time home buyer mortgage, mortgage pre-approvals, mortgage refinance, mortgage renewals, private mortgage financing, home equity, mortgage refinancing, and condominium corporation loans. These are available to clients across Spruce Grove, Stony Plain, Edmonton, St. Albert, and Devon, AB. For a complete list of my services, please click here. If you have any questions about mortgages, I’d love to hear from you. Please contact me here.