Most of the standards that are followed by mortgage lenders are set by Fannie Mae and Freddie Mac, GSE’s or government-sponsored enterprises. Mortgages that meet all of these criteria are commonly referred to as “conforming” loans since they conform to the prescribed requirements. However, there are certain times when a “non-conforming” or “non-qualified” mortgage may fit the borrower’s financial circumstances better.
4 Reason to Consider
While they may not be backed by government guarantees, here are 4 key reasons to consider a non-conforming home loan:
- Lower down payments required – Some government-backed loans such as FHA, USDA, and VA mortgages are actually considered to be non-forming home loans. They typically cater to the first-time or low-income home buyer by enabling them to put a minimal amount down or in some cases, make no down payment at all. However, if a person applies for a loan amount that exceeds the conforming loan limit (or “jumbo” loan), you’ll be required to put a minimum of 10% to 15% down.
- More flexibility – a 620 minimum credit score is required for most conforming home loans. However, non-conforming loans have no credit score requirements. A person’s credit score is just one factor considered in the entire financial picture.Since it’s a non-conforming home loan, it can be tailored to fit the borrower’s financial needs.
- More options where the type of home is concerned – Unlike conforming loans which aren’t available for all home types, non-conforming loans cover everything, provided the lender believes that it makes good financial sense. This may include properties such as assisted living facilities, co-ops, manufactured housing (mobile homes), multi-unit condos, non-warrantable condos, and timeshares. In fact, in many situations, the only option for the borrower is a non-conforming loan.
- More ways to verify income –income verification is essential where conforming loans are concerned since it factors in the DTI or debt-to-income ratio. In some cases, the lender can verify a person’s income in non-traditional ways (e.g. with bank statements) or they may just waive this altogether. Furthermore, non-conforming loans may take a person’s assets cash flow, or their home equity into consideration instead of relying on their income. This works better for individuals who are self-employed.
Mortgage Broker in Columbus: Liberty Capital Services
Keep in mind that a higher interest rate and private mortgage insurance (PMI) may be required with a non-conforming loan. If you still need more information about mortgages and interest rates, our knowledgeable experts would be happy to help.
For more information about non-conforming as well as conforming home loans, call Liberty Capital Services today at (614) 505-0620.