Finance Company Mortgages
Finance companies will also give mortgages, but you may be looking at higher interest rates. Also, some companies may not have the same stability as a bank. These are things to be aware of if you are considering a finance company as your lender.
Having said that, there are finance companies that deal with people with less-than-perfect credit. Most banks will exclude such clientele. Some small lenders like credit unions will also exclude folks with problematic credit reports. This can start to limit your choices. So, if you are dealing with a credit rating that isn't quite what the bank would want, don't despair. Check what a finance company can do for you.
Some finance companies actually specialize in "credit repair". This means that they will work with you to help you to improve your credit rating. In addition, while you may start out with a higher interest rate at the beginning, you can usually negotiate a lower rate on renewal if your payment history is good.
Another route if you are having trouble because of credit rating is a small mortgage lender. While not technically a "finance company", they are also not a bank or a credit union. These folks compete almost strictly for mortgage business. Some small companies are very competitive, even with those with credit problems of one kind or another, because they want to get into this business. (It is very lucrative, and gives investors in such companies a much better return than they would get if they left their money in a bank on deposit.) However, the issue is getting a reputable lender, and a stable lender. If your lender goes bankrupt in the middle of your mortgage, there could be problems for you.
How will you know if your lender is stable? One place you can go to check is the large rating companies. Six major credit agencies will give you information about financial strength. You can do this online:
- A.M. Best Co. - www.ambest.com
- Duff & Phelps Inc. - www.duffllc.com
- Fitch, Inc. - www.fitchratings.com
- Moody's Investors Services - www.moodys.com
- Standard & Poor's Corp. - www.standardandpoors.com
- Weiss Ratings, Inc - www.weissratings.com
These rating companies look at a broad range of factors concerning the financial performance of an organization. Note: a high financial rating is not the same as a high consumer satisfaction rating. Just because your finance company mortgage lender is very stable doesn't mean you will like doing business with them.
What do you do if these rating companies haven't rated your small lender? You'll have to do some local footwork. Talk to other clients if possible. Even check with your local Better Business Bureau to see if there are complaints.
While the best interest rate is always good, you also want a lender you can put your trust in. After all, they are holding your home in their hands. If something goes wrong with them, you could be in foreclosure. A little homework now can save you a lot of hassle and heartbreak later.