Private Lenders Offer A Second Chance For Mortgage Applicants Rejected By Banks
Since the 2007 financial crisis, many traditional mortgage lenders have revised their mortgage applicant acceptance policies in an effort to retreat from financing borrowers who appear risky, due to poor credit scores, a troubling debt-to-credit ratio or less than a 20 percent down payment. As this new “hole” in the mortgage market has developed, some private financiers are stepping up to provide home loans to borrowers who have been rejected by traditional mortgage lenders and banks.
What To Do if a Bank Rejects Your Mortgage Application
The vast majority of these private lenders have already made fortunes in the real estate business, and they stand to earn as much as 8 percent on each private home loan. This is largely because they tend to charge interest rates as much as triple those of traditional mortgages, which means higher monthly payments for mortgagees. Though this may seem like a boon for the private lenders, borrowers are also protected under the law. Each private lender must, at a minimum, register with their home state to ensure they play by the rules of the Consumer Financial Protection Bureau.
Many private lenders report demand for their services is growing each year, since fewer prospective homebuyers are meeting the more stringent mortgage qualifications issued by banks. Though interest rates are high, rapid growth in this area illustrates that there is increasing consumer demand for an alternative road to homeownership, which may lead traditional lenders to back off some of their recent qualification changes.
The unprecedented growth in the private lending industry is likely to continue as long as traditional lending continues to shrink. If you’re hoping to purchase a home but have been turned down by banks, a private lender may be a viable path to homeownership.
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