In the Canadian mortgage industry, lenders are often categorized as “A lenders” or “B lenders,” depending on their lending criteria and the type of borrowers they typically serve. Here’s a breakdown of which types of lenders fall into each category:

A Lenders

A lenders are traditional financial institutions that offer mortgages to borrowers with strong credit histories and stable incomes. They include:

1. Major Banks:
   • Examples: RBC, TD, Scotiabank, CIBC
   • Why They’re A Lenders: These institutions have strict lending criteria and generally require a good credit score, a stable income, and a solid employment history. They offer competitive interest rates and cater to prime borrowers.
2. Credit Unions:
   • Why They’re A Lenders: Credit unions also have relatively strict lending criteria, similar to major banks. They typically offer competitive rates and are a good option for borrowers who meet traditional lending requirements.
3. Monoline Lenders:
   • Why They’re A Lenders: Monoline lenders specialize in mortgages and often work with borrowers who have good credit. While they may offer slightly more flexibility in terms of product offerings, they still require a strong credit profile.

B Lenders

B lenders are institutions that provide mortgages to borrowers who may not meet the stringent criteria of A lenders. These borrowers might have lower credit scores, less stable incomes, or be self-employed. B lenders include:

1. Some Monoline Lenders:
   • Why They’re B Lenders: While most monoline lenders cater to A-level borrowers, some may offer products tailored to those with less-than-perfect credit. These lenders might still require a reasonable credit score but are more flexible in their criteria.
2. Private Lenders:
   • Why They’re B Lenders: Private lenders are typically considered B lenders because they cater to borrowers who may not qualify for traditional mortgages due to poor credit, inconsistent income, or other factors. They offer more flexible lending criteria but at higher interest rates and shorter terms.

Key Differences Between A and B Lenders

• Credit Score Requirements: A lenders usually require a higher credit score (typically 650 or above), while B lenders may accept scores below this threshold.
• Interest Rates: A lenders offer lower interest rates compared to B lenders, who charge higher rates to offset the increased risk.
• Loan Terms: A lenders generally provide longer-term mortgages with more favorable terms, while B lenders may offer shorter-term, higher-risk loans.
• Flexibility: B lenders are more flexible in their lending criteria, often considering borrowers with unique financial situations, such as self-employed individuals or those with credit issues.

When to Consider a B Lender

You might consider a B lender if:

• You have a lower credit score.
• You are self-employed with fluctuating income.
• You have been recently discharged from bankruptcy or have a consumer proposal.
• You cannot qualify for a mortgage through an A lender due to other financial challenges.

However, it’s important to be aware that the higher interest rates and shorter terms offered by B lenders mean that your mortgage may be more expensive over time.

Understanding whether you should work with an A lender or a B lender depends on your specific financial situation. If you qualify for an A lender, you’ll benefit from lower rates and better terms. If not, a B lender might provide the flexibility you need to secure a mortgage, though at a higher cost.