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Other Types of Lenders
Banks and savings and loan companies are not the only place to go to borrow money for a mortgage. There are many less known agencies that offer mortgages as well. The credit union may be one of the most attractive options. Because credit unions are small nonprofit businesses, they offer competitive rates in order to attract business from the bigger financial institutions. Credit unions traditionally portfolio their mortgages, allowing them to determine their own rates, another factor in their lower rates. Within the past several years, credit unions have begun serving loans through the secondary market, giving them a wider selection of mortgages available. Their low rates, for the most part, have been maintained.
Life insurance companies have also jumped into the mortgage game. If you have a life insurance account through a big insurance company such as Prudential, you may be able to borrow against your account. This is one of the very few instances that you are able to touch life insurance money before you are deceased. Even if you do not have an account with them, some insurance companies still approve borrowers.
Fannie Mae and Freddie Mac offer loan products known as “A Minus” loans. Borrowers of these loans often have poor credit and would not normally qualify for standard loans. Because the borrowers in these instances are generally higher risk, the interest rates for these loans is higher. If, however, the borrower makes all of their payments in a timely manner for two years, the interest rate is lowered. These loans can be very costly since their interest rates are so high.
There are other loans a little more sinister in nature. These are offered by predatory lenders who attract borrowers that would not be able to get a loan elsewhere. These lenders often depend on the borrower defaulting so that they may repossess the property. Another strategy that these lenders use is to charge ridiculous rates. High point charges and high nonrefundable application fees are common ploys. These types of loans are not exactly illegal, only highly unethical. Remember, if a loan sounds too good to be true, it probably is.
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