A growing number of potential U.S. homebuyers are turning to alternative lenders to purchase their dream homes.
According to news from CNBC, six of the top 10 home lenders by volume now fall into the alternative lending category, with customers including the self-employed and those who rely on bonuses as a substantial part of their income, as well as homeowners who want to keep cash on hand for other investments.
"Life is not a cookie-cutter circumstance. Everyone has their own set of baggage that they come to you with," said June Richardson, a vice president at mortgage lender GuardHill Financial Corp. in New York. "You need to have the right team behind you in order to get the deal done."
Guy Cecala, publisher and chief executive officer of Inside Mortgage Finance, recommends comparing interest rate and underwriting information from a credit union, a big bank and a non-bank lender.
"There's nothing wrong with getting a loan from a non-bank," Cecala said. "Often, you'll get better terms, better service and looser underwriting."
PennyMac Financial Services and loanDepot are two of the biggest players in alternative lending. Another, Citadel Servicing Corp. of California, arranges mortgages of up to $3 million, and even serves customers with credit scores below 500.
Citadel's largest customer base is the self-employed, who typically wind up with either a 30-year, fixed-rate amortizing mortgage or an adjustable-rate loan with a fixed payment for seven years and a payment that fluctuates annually after that. One of the company's provided options allows the borrower to use bank statements as proof of income rather than a W-2 form, which is often a necessity for the self-employed.
Interest rates typically run half a percentage point to one point higher than the prevailing market rate. Down payments of 20 percent to 40 percent may be required.