A Washington Post report back in February revealed that non-bank lenders made the bulk of mortgages last year. Post-crisis regulations proved too much for the bigger banks who are expected to make perfect loans; otherwise, they might face penalties and lawsuits for non-compliance. With that, is it easier to apply for a mortgage with a non-bank lender? Ever considered getting one?
Who Are Non-Bank Lenders
Financial institutions that are purely engaged in lending and not offering depository and checking accounts are considered non-bank lenders.
These non-bank lenders often bank on their online platform, which makes them more accessible to the general public. They are also at the forefront of developing technologies that speed up the usual tedious processes of mortgage underwriting, offering quicker results and lesser paperwork for their customers.
If convenience and speed did not win you over, non-bank lenders have flexibility; it’s something that the average borrower could appreciate in today’s tightened credit environment.
What Can They Offer
Understandably, traditional lenders require a lot of things for borrowers to get approved. This “seemingly” high bar leaves potential mortgage borrowers in the cold; some don’t even attempt to apply for a mortgage lest their credit score might cost them their application.
This is the market a non-bank lender could try to serve. It can cater to borrowers with low credit scores, high debt-to-income and loan-to-value ratios, etc. Being not as heavily regulated as their bank counterpart, a non-bank lender can be more lenient toward less-than-perfect borrowers.
Non-bank lenders may offer competitive rates and because they have lesser overhead costs, they can pass on fewer fees to borrowers.
Some of these lenders also have an array of nontraditional mortgage products, like subprime mortgages, stated income loans, and low-doc mortgages. This presents you with choices when buying a home that a standard mortgage might not be able to accomplish.