Equity Lenders (often Private Lenders or Lending Groups) tend to use the equity in your property as the primary qualification for your loan.
Equity Lenders are unlike conventional institutional lenders because they are less concerned with credit scores, income documentation, payment history, or even foreclosure status.
(Equity Lenders are great lenders for the self employed, or anyone that may have difficulty qualifying with the new stricter institutional mortgage guidelines.)
Equity Lending guidelines are driven primarily by the property being the sole security for the loan.
Therefore, the property must have at least 40% of its equity remaining at all times. (This makes it nearly impossible for you to ever to become upside down with home loan from an equity lender!)
So, if you have a property worth $1,000,000, an Equity Lender could approve you for a loan for up to $600,000 (to pay off existing liens, get cash out, and/or etc.) no matter what your credit score, payment history, income documentation, or foreclosure status.
- So, when an Institutional Lender would deny your loan because of a late mortgage payment or a not so good credit score, an Equity Lender would approve. -
What and why are Equity qualifying Lenders popular?
Equity Lenders are NOT Large National Institutional Lenders.
Equity Lenders tend to be local private individuals or small investment groups!
Equity lenders can be flexible and can design their payment schedules to meet the home owners unique needs.
Equity lenders can qualify you for a loan based solely on your Equity.
Equity lenders have NO Credit Score requirements.
Equity lenders have NO Payment History requirements.
Equity lenders rarely have prepayment penalties.
Equity lenders are less concerned if you have been 30, 60, 90, 120, or even 150 days late on your mortgage payments.
Unlike conventional lenders, Equity lenders tend NOT to lend to 100% of the value of your home. Meaning, you are positioned to remain with significant equity in your home or property.
It is important to Equity lenders that their loan is beneficial to you and that there is an appropriate exit strategy established.
NOTE: If you are having a difficult time qualifying through conventional institutional underwriting, try an alternative lending option such as with an Equity Lender.
Why are people having problems qualifying with Conventional Lenders?
Conventional Lending is done by Large National Institutional Lenders.
Institutional Lenders are focused on originating, packaging and then selling your loan and are rarely flexible enough to assist their borrowers during difficult times.
Because of strict packaging guidelines, Conventional Lenders tend to have strict credit score requirements.
Most conventional lenders now require credit scores over 620 for approval.
Conventional Lenders tend to have strict payment history requirements. (this means NO Late Payments allowed within the previous 12 months)
Additionally, conventional lenders have growing requirements regarding:
Income
Debt to Income Ratio
Length of Employment
Credit History and Number or Credit Trade lines
W-2 Required Income Documentation
If you have been turned down for a loan, or you feel that you may have problems qualifying, or your mortgage broker is having difficulty qualifying with their lender, give us a call!
We can put you in touch with an Equity Lender that can have your loan funded quickly and with few qualifying hurdles!
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