Getting your mortgage from a B lender like CMB is always an option to consider in case you can’t get the mortgage from an A lender. And in case you get turned down by a B lender, which is quite a rare thing, you can always turn to C lenders to still get the loan with slightly less beneficial conditions. However, none of these steps are possible if you have no idea, what this alphabet of lenders means. Here’s a little explanation.
What Does “Lender” Mean In This Context?
A lender is a person, who is willing to extend the money to you. However, the lender will only lend you money, if he thinks that he would get paid back. If you want to be approved for any kind of loan in Canada, it is always better for you to be prepared, maintain a good credit history, have a stable income and have enough funds for a down payment.
What does A-class Lender Mean in Canada?
A lender has been given an A rating, when all of his financial records, including loan payments and debt servicing, are taken into consideration. The lenders with an A rating are often the most reliable in terms of making timely loan repayments. Moreover, they are more likely to offer you lower interest rates and better terms than other lenders with lower ratings or inconsistencies on their files.
In short, A lender is one of the Big Six banks: RBC (Royal Bank of Canada), CIBC (Canadian Imperial Bank of Commerce), Scotiabank, TD (Toronto-Dominion), National Bank, and BMO (Bank of Montreal).
A-Lender Requirements for a Loan
These lenders will require you to have a minimum credit score of 740, while your income must be at least $60,000 annually. Your loan amount could be anything from $5,000 to a maximum of $250,000. Mortgage rates offered by these lenders start at 3.69%.
What does B-class Lender Mean in Canada?
B lenders are rated with the next highest rating after A lenders. In fact, C is often considered to be a subset of B. And just like A lenders, these B-class loans will also have reasonable interest rates along with flexible terms and conditions.
Practically, a B lender like Certified Mortgage Brokers is your way to go in case you get a denial or know you’ll get a denial from an A lender. B lenders have less strict requirements and can help you get the loan on more relaxed terms. However, you definitely don’t get it for free: a B lender will have a slightly higher interest rate than an A lender, and you’ll probably pay more in closing costs. It sounds unfair, but sometimes — there are simply no other options. And given that the popularity of B lenders is on the rise, more and more Canadians turn to B landers each year.
B-Lender Requirements for a Loan
B lenders have a mid-level credit score of 650 to 739, while the minimum annual income is $60,000. Your loan amount could be any amount from $5,000 to a maximum of $350,000. Your interest rate will depend on a whole spectrum of factors.
What does C-class Lender Mean in Canada?
C-class lenders are rated with the lowest credit ratings. However, they are still considered to be viable options when you need to get a loan, which has the least stringent requirements. These loans will probably come with much lower interest rates and low down payment amounts.
In more simple terms, a C lender is a private lender. These lenders do not have any affiliations with any banks or institutions, which means that they can offer you a much better deal. However, the fact that they can does not mean that they will. A private lender will — most likely — give you a significantly higher credit score, up to 15% and more.
C-Lender Requirements for a Loan
C lenders will have a low credit rating of 599 to 699, while the minimum annual income is $24,000. You’ll be required to pay a down payment of at least 35% for these loans. Your loan amount will depend on the firm that you apply to, but it can be as high as $250,000.
In practice, C lenders are known as the last resort measure for those who get a denial from both B and A lenders, exactly because they barely check your financials. Of course, you wouldn’t get a loan from a C lender if you’re already in debt and if you have obvious zero chances to pay back the loan, but your credit score and your current income would matter less for them.
Which One Do You Need?
If you can, you should always try to get a loan from an A lender or a B lender. They’ll offer you the lowest interest rates and have the most flexible terms. But to be clear, it is not worth trying to push for approval from an A lender if your credit score is low or your income is not stable. You might as well try a B lender, which will have more relaxed requirements and financial demands, and sometimes — it’s even a better option. Especially when you know that every denial from an A lender is forever stated in your credit history. For those who just can’t get a loan on conventional terms from an official institution, C lenders are always an option.