What is considered a non-conforming loan?

non-conforming loans

Have you ever been in the thick of home shopping only to be confused by terminologies like conforming and non-conforming loans? You may have asked yourself, what do those terms even mean? The good news is that this blog post will explain it all! A non-conforming loan has specific characteristics that differentiate it from a conforming loan. In this article, we’ll dive into the details of non-conforming loans, so you can make an informed decision when choosing a mortgage product. Get ready to understand more about financing your dream home today!

Are non-conforming loans bad?

No, non-conforming loans are not bad. They are simply loans that do not meet the conforming loan requirements set by Fannie Mae and Freddie Mac. This could be because the loan amount is higher than the conforming limit or because the borrower doesn’t fit into the standard credit box.

Non-conforming loans can be an excellent option for people who can’t meet the requirements of a conforming loan. They often have lower interest rates and various terms and conditions than conforming loans. So if you’re looking for a mortgage but don’t fit into the standard mold, it’s worth considering a non-conforming loan.

Types of Government-backed Non-conforming Loans

VA Loans. 

VA loans are ideal for homebuyers to make their mark in a competitive housing market. Fannie Mae or Freddie Mac can’t hold these government-backed nonconforming mortgages, but they’re still highly sought after as lenders take them off buyers’ hands and resell them on other markets.

FHA Loans. 

FHA loans are an excellent choice for many potential homebuyers who don’t have the ideal credit score or DTI ratio – because, unlike conventional loans, FHA ones aren’t subject to such strict requirements. With an FHA loan, you could still get that dream house with just one catch: You’ll need to pay more of a down payment upfront.

USDA Loans. 

A USDA loan could be the answer for homebuyers who are short on cash but want to get into their dream house! With its easy qualification process and no money-down requirement, it’s one of only two loans that offer incredible benefits like low mortgage rates. So if you’re looking for an opportunity to buy in eligible areas without breaking the bank, investigate a USDA-guaranteed loan today!

When do I need a jumbo loan?

A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac. Jumbo loans are available for purchase and refinance transactions and can be used for primary or second homes.

A jumbo loan may be the right financing option if you’re in the market for a home priced above the conforming loan limit. Contact a local lender to find out if you qualify for a jumbo loan and learn more about the rates and terms available.

Lesser-known Types of Non-conforming Loans

  • Holding mortgage. 

A holding mortgage could be the perfect opportunity to help someone become a homeowner without breaking the bank. In this unique arrangement, you can provide financing for their purchase and hold onto the property title until it is paid in full – making sure everybody comes out on top!

  • Hard money loan. 

If you are looking for a loan but running into roadblocks? Hard money loans may just be the solution you need. Funded with private capital and secured by property or other assets as collateral, these short-term financing options are your ticket to get around traditional lenders’ lengthy processes – getting you back on track in no time!

  • Purchase money mortgage. 

A purchase-money mortgage is a savvy way to buy your home when going through conventional channels isn’t possible. With seller or owner financing, you can get into that dream house without missing out on the chance of homeownership! 

  • Interest-only mortgage. 

Interest-only mortgages initially provide lower payments but come with unique risks and considerations! Before you take the plunge into a potentially money-saving loan option, it pays to understand how interest-only works.

Need Help? 

If you’re seeking a non-conforming loan, don’t hesitate to reach out to Stone Tree Lending. We are experts in the field and can help you get the best loan possible. Give us a call today!

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