Seeking Private Mortgage Lenders Calgary? Amansad Financial has relationships with private lenders in Alberta and all over western Canada who are looking to invest money in the real estate market by funding private mortgages. There is no time like the present if you are thinking about buying a house Calgary. Prices are beginning to work their way up again, as some optimism is entering the economy, but they are still low according to historical trends. Of course, interest rates have never been lower than they are now, so you can afford more house than you could have a few years ago. There are several neighborhoods in Calgary that are starting to take off, and you can get in on the ground floor if you are ready to make a purchase.
Pursuing Private Mortgage Lenders in Calgary
Of course, unless you have several hundred thousand dollars sitting in a vault somewhere, you are going to need financing to complete that purchase. The most common way to do this is through a bank. You save up enough money for a down payment and then go to the bank and apply for a loan. They take a look at your assets, your income history, and your credit score, and then they determine whether you are worthy of financing. For a lot of people, this works, but for a lot of other people, it doesn’t.
Why? Well, the down payment can be a hurdle. People sometimes have a hard time saving up enough money to make the bank happy, and then they end up settling for a high ratio loan and pay thousands more in mortgage insurance over the life of a loan.
But even if you have saved up enough money to make a solid down payment, sometimes that isn’t enough for the banks. If you own your own business, you might have a hard time establishing a solid income history. The banks like to see a regular income stream that shows you will be able to pay for the mortgage over time, and there are a lot of successful entrepreneurs who can’t get a mortgage approved because they can’t show regular income.
Other times, people have gone through financial difficulties in the past. Maybe they got laid off from their job, or they had an illness that kept them from working for a while, and so they had to burn through some savings and then some. The bottom line is that they missed some payments on some crucial items, and they may have gotten close to having a car repossessed. In this case, they will have a fairly low credit score, even a few years later — and even after they have had the chance to save up a good amount of money.
Private Mortgage Calgary
If this fits you — if you have gone through some rocky credit moments in your past but have saved up enough to make a significant down payment, then you might want to consider finding a private lender to help you buy that house you want in Calgary. You’ll need a down payment of at least 25 percent in some cases if you want to use a private lender, although it is possible to put together a creative package with a down payment as low as 15 percent. The reason for this is that your credit is not the determining factor for the loan. Instead, it is the value of the house — and the loan to value ratio. If you are purchasing a $300,000 house, and you can put $90,000 down, then you’re only asking to borrow $210,000 from the lender. The lender will run an appraisal, and in the unlikely event that you default, he’ll want to know that he can sell the house for at least $210,000 (and hopefully more) if he has to foreclose. It’s nothing personal, but he is assuming a risk by issuing the loan.
Another important point to remember is that you can’t count on a private lender to carry the note for the full amortization period, or even for the length of term that a Canadian bank will do. Banks can go as long as ten years, but private lenders won’t go more than one or two years with an option to renew; a three-year private mortgage is fairly rare. They don’t want to tie up their money that long, and they don’t have that diversification of risk that the big banks do. To keep your payments low, they will usually offer you the chance to pay just the interest on the loan or amortize the payments over 25 to 35 years.
If you’re in the market for a property in Calgary but have bad credit, mortgage options may seem limited to you. To be sure, you’re not going to be able to walk into a white-shoe bank and get a rock-bottom mortgage rate, but one of the advantages of the Canadian system of mortgages is that if your credit isn’t pristine, you’re not locked into a long-term loan with a high rate. Instead, you pick a mortgage term that gets you into a property, and you build your credit and improve that income history until renewal time, and then you go get a better loan.
How to Get a Bad Credit Mortgage in Calgary Alberta
Outside the “A” market of lenders, there are also the “Alt-A” or “B” class, which provide loans at a slightly higher interest rate. Then there is the “C” market, also known as private lenders. These notes take on the most risk, which is reflected in the higher interest rates and shorter terms. Within metro Calgary and the suburbs surrounding the city, with this type of lender, you need to be ready to put at least 25 percent down, as you’ll have a hard time finding a lender to provide funding for more than 75 percent LTV (loan to value ratio). This means that if you’re looking at a $400,000 property, you need to have $100,000 to put down.
But what if you don’t? You’re still not necessarily out of luck. Amansad Financial has relationships with some “C” market lenders who will go has high as 85 percent LTV and even 90, depending on where the property is in Calgary. However, if you’re looking in a rural area, you’ll need a lot more money to put down, because the top LTV is likely to be 60 or 65 percent, even though some lenders will go to 75 if the property is promising. If you’re just buying land out in the country, plan on putting half of the money down with a private lender. The more documentation you have of your income, though, the more choices you will have when it comes to finding a private lender.
Weak Credit Mortgage Calgary
With a private lender, your credit score doesn’t come into play. He already knows that your credit isn’t that good, which is why you’re shopping for a loan from him in the first place. What this means is that the value of the property is the key factor. This makes a property appraisal key, because if the value isn’t there, you’re not going to get what you want.
This doesn’t mean that you should run out and pay for an appraisal for that property that you want. A lot of lenders take a dim view of appraisals that clients order. Instead, you need the broker or lender to order the appraisal. Remember that $400,000 property we were talking about earlier? If you have $100,000 to put down, and the lender wants at least 25 percent down, and the appraisal comes back at $450,000, you’re not going to qualify with that lender. Amansad Financial may be able to point you toward a higher LTV lender who can help you, but be prepared to have multiple options when it comes to picking a property. If the appraisal comes back at $340,000, you’ll have enough to put down, but you may want to take a second look before completing the purchase, since the appraisal is so far below the asking price. You may run into difficulty from the lender if you can’t get the asking price down, because if you pay that $400,000 and put $100,000 down, you’ll have a $300,000 loan against $340,000 value, not enough even with an 85 percent LTV lender.
If you’re looking for a second mortgage and may need to sell if you can’t get it, ask your realtor to run a comparative market analysis, or CMA, on the area around the property. This provides the lender with more documentation to support your application. The realtor is motivated to help you with the analysis because he may get a listing out of the deal if you end up having to sell the house.
One factor to remember when dealing with any lenders (A, Alt-A/B and C/private) is that the more documentation you have on your side, the more likely you are to get an approval. Lenders are looking for borrowers, so you can’t take rejections personally. It’s a question of finding the right information to convince the lender to work with you. Getting that loan closed can be frustrating, but ultimately going through the paperwork grind is worthwhile if you get the home you want.
So if you have bad credit or think you’ll need a private lender to help you buy that house in Calgary, give Amansad Financial a call today. We can connect you with a network of individuals and companies looking to invest in the mortgage market, and we can find the perfect match for your borrowing needs.