Financing in 2020
NON-BANK VS TRADITIONAL BANKING
Go back to the 1980s and the mortgage field was largely dominated by savings-and-loan associations. These so-called thrifts were local financial institutions mainly established to do little else but offer mortgages. “Nonbanks” such as Quicken Loans, loanDepot, New American Funding, and Carrington Mortgage Services are new competitors to "regular banks" - meaning that borrowers will continue to have a broad range of mortgage choices.
One important difference is that a NON BANK like QUICKEN LOANS, is that they approve you with minimal submission of income qualifications which can mean you're not getting an accurate interpretation of what you can afford, or what your purchasing power truly is.
In addition they share an accurate mortgage rate for us to do the reverse math in advising what a home will cost you on a monthly basis. Big banks ( traditional such as the Chase, Wells Fargo, Citizens Bank, and Jovia) are more popular in issuing conforming 30 year loans. Mortgage Bankers within a traditional bank will discuss loans solely within the bank they're affiliated with.
PRE- QUALIFICATION VS PRE-APPROVAL
A non bank issues pre- qualification letters. They will rely on your responses, or estimates, to create a borrower profile. Additional requirements will be needed to solidify a loan rate, such as proof of income, credit checks, employment history, and asset requirements.
A Bank issues pre-approval letters, which are a comprehensive underwriting of the borrower. From the start, they will verify paperwork such as a background check and credit check to be able to confirm at what rate, and what product type you can use to make a purchase. This is usually a more efficient and accurate way for you to know what you can afford.
For borrowers, the emergence of nonbanks has been a good thing for two reasons:
1) A competitive advantage exists. Non banks act as Mortgage Brokers will work to get you a lending rate anywhere, with any bank.
2) Nonbanks represent the growing use of electronic platforms and new forms of service delivery. Now everyone — banks and nonbanks — is online.
Non-banks can have their disadvantages too. Be aware that non-banks often lend to lower-income borrowers with credit missteps, they might charge higher mortgage rates and fees as a way to protect themselves. Borrowers with lower credit scores, after all, are more likely to miss payments, making them riskier ones for lenders. It’s why these borrowers often have to apply for bad credit loans that come with higher rates and fees. They offer more of a pre-qualification to borrow a mortgage versus a pre-approval loan.
A non-bank also doesn't know the complexity of condos or co-ops in NYC. A local bank which has already reviewed a NYC condos/co-op's financials can lend more stability. They are more common in the suburbs. These lenders contract out a local appraiser which will give the both parties confidence in the value of the home in its respective market.
Thanks for reading!
