Once upon a time, borrowing against a home was very easy to do. Today things are a lot different. Although it does not necessarily mean that it is impossible to get a mortgage anymore. Rather, it means that you are likely to have to seek out an ‘alternative lender’ instead. Indeed, regardless of whether you want to refinance an existing property, invest in a property, or buy your first home, alternative lenders are certainly worth your consideration.
Millennials are the largest share of home buyers at 36 percent. Sixty-five percent of these buyers were also first-time home buyers.
Who Are the Alternative Lenders?
Basically, they are organizations, groups, and individuals that aren’t banks but are happy to provide you with a loan against your property. Alternative lenders often offer very interesting benefits, including online applications, unique terms and conditions, and help for those with a poor credit score.
There are several factors that contribute to a credit score, including the number of inquiries made for new accounts.
There are also lots of different lenders out there that could be classed as ‘alternative’, although they usually span two different categories. The first is the direct lender, which means that they actually lend their own money. The second type is the broker or middleman, who connects lenders and home buyers together.
The Credit Union
One example of a direct lender is the credit union.
On average, credit unions offer higher saving rates and lower loan rates. This could help group your savings grow faster and loan cost less. Credit unions also tend to charge lower fees, require lower deposit balances and offer better service.
They are a direct lender because it is their money that is provided for home loans. They also have different mortgage process options. Usually, you do have to be a member of a credit union before you can apply, however. Additionally, it is important to be aware that not all credit unions are created equal and that they all have different membership requirements and financial options.
The second type of direct lender is an online lender.
New online-only mortgage lenders and online options for existing lending institutions are available to the public every day. As virtual tools become the new norm, homebuyers looking to finance their big purchase should expect a less intimidating and more efficient borrowing experience.
Because these lenders operate online, they often have opportunities to customize the loans that are available. Additionally, they often only take minutes to approve an application, all of which is done electronically. Their fees are also often much lower than other lenders. However, it can be difficult to speak to an actual person should you have any question.
The Hard Money Lenders as an Alternative Lender
The final option is the hard money lender. These lenders exist for two main types of individuals. First, there are there for those who have applied or tried to apply for all the other alternative lending options and either have been declined or already know they won’t meet the criteria yet. The latter is the better option as it reflects better on the credit score. The second group of individuals who use these loans are investors who know they will soon sell the property, or take out a more traditional mortgage on it. Fix and flippers are good examples of these.
Whichever type of lender you want to go with, it is vital that you exert due diligence and that you do your research. Each alternative option has its own pros and cons. At the end of the day, your financial future is at stake so it is important that you find the one that will give you the greatest benefits.