The Canadian lenders have set high criteria when applying for a loan when one thinks to oneself “I need a private lender”. The reason for the higher criteria is to reduce their exposure to bad debt. This means that people who can afford a mortgage are turned down for reasons which may not make any sense to the borrower. Some reasons a lender may turn you down are for a bad credit rating or if the loan to value of their property is too high. Most private lenders in Canada usually only lend within certain geographic areas and will consider each loan application based your entire financial situation.
Self employed income raises a number of red flags with many Canadian lenders such as the major banks and many people think “I need a private lender”. The main reason is that self employed income can be overstated or understated. People can say that they made more or less money and pay taxes tax on the declared income. In most cases a traditional lender will want “notices of assessment” from Revenue Canada for the past three years to confirm your income. In contrast private lenders for home loans view self employed income as one part of your overall financial situation. If there is equity in your property a Canadian private lender may be interested in providing you with the money required.
The loan to value ratio (LTV) is one of the most important indicators that private lenders look at when determining your loan approval. To find the loan to value (LTV) ratio on your home divide any outstanding mortgage on your house by the present market value of your house. An example is a home with a market value of $400,000.00 and total mortgages of $300,000.00, the LTV for this house is 75%. Higher loan to value ratios above 80% will result in a mortgage with higher interest rates and possible fees. Most private lenders will not exceed a loan to value ratio of 90% and will usually approve mortgages with a loan to value ratio below 85%.
Many private lenders require an appraisal of a house before they agree to provide any funding for a mortgage or loan. Appraisals are completed by professionals who provide an unbiased opinion of the present market value of the home. The appraisal will take into account factors such as the roof, furnace, bathroom and overall condition of the house. Any problem areas such as broken drywall or a leaky roof will be noted in the appraisal. Recent upgrades or renovations such as a new kitchen or bathroom can increase the market value of the property.
Our agents have access to one of the largest networks of private lenders for home loans in the country. Call one of our mortgage agents today to find out how a private lender mortgage can help your financial situation when you a private lender.