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Conforming
Lenders
These are the big boys you see on TV offering rates that are unfathomably low.
They are call 'conforming' because they sell loans that conform to guidelines set by FANNIE MAE and FREDDIE MAC.
These two giants buy conforming loans and finance them with bond issues. Chase, Wells Fargo and Washington Mutual
are high profile examples of conforming lenders but many homes loans are funding by less visible but equally regulated wholesalers
like ABN AMRO, Aurora and Washtenaw. There credit standards are usually higher than other lenders however there
appraisal review, income documentation and rental/mortgage payment documentation are generally easier.
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Alternative A or Alt-A Lenders
These lenders often offer competitive rates to conforming lenders, however they
can do loans that confoming lenders won't. For example some Alt-A lenders will finance as much as 106% of the purchase
price on a home to cover closing costs. Limited documentation and unusual property scenarios are also the realm
of Alt-A. Appraisals are usually looked at more carefully at Alt-A lenders and if you have excellent credit you
will find yourself paying a premium for "outside the box" programs.
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BC and Private Lenders
These companies are often mislabeled as "preditory lenders" because they charge a greatly inflated
rate as well as higher closing costs to finance people with marginal to poor credit. True BC lenders (B and C
credit - not Bad Credit) who will lend to truly wretched credit are becoming fewer in number due to snowballing preditory
lending laws. This has had the unintended result of making it almost impossible for a person with bad credit to
buy or refinance a home. In some states like North Carolina and Texas you have almost no BC companies doing business.
The fact is that these types of loans are far more risky for lenders so they need to charge higher fees. As the
government regulates these fees down further state by state mortgages for the credit challenged becomes less available.
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