When buying a home, most people turn to traditional banks for a mortgage, but strict lending rules can often limit how much you can borrow, even if you can comfortably afford the payments. For many, an alternative lender offers a practical solution by providing greater flexibility. Let’s compare what it looks like to purchase a $1,000,000 home with a 20% down payment ($200,000) using both a traditional bank and an alternative lender. This comparison will also show what the maximum mortgage would be with a $150,000 income, allowing you to see both scenarios.
Comparing a $1M Purchase ($800K Mortgage) 🏡
Even for the same mortgage amount, banks and alternative lenders offer different terms that significantly impact your monthly payments. This comparison uses the interest rates of 4.39% for the bank and 4.69% for the alternative lender.
| Feature | Bank (Traditional) | Alternative Lender |
| Mortgage Amount | $800,000 | $800,000 |
| Interest Rate | 4.39% | 4.69% |
| Amortization | 30 Years | 35 Years |
| Monthly Payment | ≈ $4,001 | ≈ $3,881 |
As the table shows, the bank’s shorter amortization period results in a slightly higher monthly payment despite its lower interest rate. The alternative lender’s longer amortization period offers a more manageable monthly cost, making qualification easier.
Qualifying with a $150K Income 💰
The true difference between lenders becomes clear when you look at how much you can qualify for based on your income. Lenders use a Total Debt Service (TDS) ratio to determine the maximum percentage of your income that can go toward debt.
For a borrower with a $150,000 annual income and no other debts, here’s how the maximum buying power compares.
| Feature | Bank (Traditional) | Alternative Lender |
| Annual Income | $150,000 | $150,000 |
| Maximum TDS Ratio | 44% | 50% |
| Max Monthly Housing Costs | ≈ $5,500 | ≈ $6,250 |
| Estimated Max Mortgage | ≈ $993,000 | ≈ $1,114,000 |
| Estimated Max Buying Power | ≈ $1,241,000 | ≈ $1,392,000 |
With the alternative lender’s more flexible rules, a $150,000 income could unlock over $150,000 in additional buying power.
- Alternative Lenders provide greater flexibility with higher debt ratios and longer amortization periods, which can significantly increase the mortgage amount you qualify for.
- For a $1,000,000 purchase, this flexibility could mean a lower required income and more than $150,000 in extra buying power.
Disclaimer: This information is a guideline and not personal financial advice. Please consult with a licensed mortgage broker before making any decisions.