Should I Use a Private Mortgage Company?
When you’re mortgage shopping, you’ve probably got plenty of options for funding. Exploring the different mortgage lenders you could choose is an important process because you want to make sure you get the best loan.
What Is a Private Mortgage Company?
A private mortgage company typically works with various lenders and possibly even private investors who fund the loans. This intermediary matches up borrowers with lenders to find advantageous terms and rates. There are advantages and disadvantages to working with private mortgage companies, depending on your financial situation, so it’s important to explore all options fully.
Banks as Mortgage Lenders
Banks are the standard mortgage lenders that make loans and put up the money that you need to buy a home. Approaching a bank will involve you proving your financial fitness and ability to take on the mortgage to qualify. After you jump through the bank’s hoops, the bank will then offer you a mortgage with terms and interest rates based on your resources and creditworthiness.
Benefits of Working With a Private Mortgage Company
Private mortgage companies such as PrimeLending Mortgage Company are usually able to offer loans to consumers that are free of many of the rules and regulations that banks must follow, making it easier to get approved for a mortgage. The banks have to protect their depositors’ funds when granting loans, so they are forced to require high credit scores and cash flow with low debt-to-income ratios for borrowers.
Banks also tend to have a wide array of costs and fees that they have to recover by increasing fees on loans.
Potential Drawbacks of a Private Mortgage Company
As banks strive to compete against private mortgage companies, they will often undercut their competition to gain you as a customer, making bank loans more appealing price-wise.
Private lender interest rates tend to be higher, because their investors and lending banks demand attractive returns, forcing them to pass the higher costs along to borrowers.
Deciding Which Type of Lender Fits Your Needs
To know which type of lender to choose, you’ll need to figure out your borrowing needs.
If you have above-average credit, you can assemble your financial documentation readily and you have a stable employment history, you have your pick of virtually any type of lender that will offer you the best terms and rates. If you have a long-term relationship and multiple types of accounts with one bank, it’s definitely worth setting up your mortgage with your go-to lender.
If you’re self-employed or prefer not to give out your full financial documentation to a lender, a private mortgage company might be the best choice for you. This might also be the best option for you if your credit history is a little sub-par.