The world of conforming and a non-conforming mortgage is comprehensive. To get insights into this type of economy and what non-conforming loan underwriting is, you must first understand its definition.
Non-conforming loans are home mortgages that do not meet Freddie Mac or Fannie Mae’s requirements. They are funded by lenders who do not need to sell their loans to either Fannie Mae or Freddie Mac, so you are subject to different loan interest rates and terms depending on the loan’s guidelines. Below are tips for working with a private lender on your non-conforming mortgage.
Loan Requirements
If you are looking to acquire a non-conforming loan, requirements vary depending on the type of mortgage you want and your lender. Overall requirements you will usually need to meet before applying for a non-conforming mortgage include a minimum credit score of 580 and a minimum down payment of about 20 percent, depending on your lender and program. The necessary debt-to-income ratio and maximum loan limits will both vary depending on your lender and program.
Private lenders are essential in the process of acquiring a non-conforming mortgage as the government does not back these loans. Instead, they are funded by private lenders, like Precision Capital – Your Private Money Source, and exist to offer loans to businesses and private investors.
Types of Non-Conforming Loans
Non-conforming loans mainly include loans that are not backed up by the government like USDA loans and VA loans are and loans that are above Freddie Mac limits. There are different ways why a loan doesn’t fall under Freddie Mac or Fannie Mae requirements.
Amount of the Loan
When applying for a large mortgage or jumbo loan, you do not fall under Freddie Mac’s loan guidelines. Freddie Mac does not underwrite loans above $510,400, as they carry higher interest rates.
Home or Loan Characteristics
If you want to purchase an investment property or vacation home, you do not fall under conforming loans. These types of properties have one higher point of interest.
Documentation
If you do not have enough financial documentation, or if you are self-employed and need a loan, you are eligible to apply for a non-conforming loan.
Loan Underwriting Process
Non-conforming loan underwriting is the lender’s procedure to determine an applicant’s eligibility to acquire a mortgage loan. During the process, a bank determines your credit score. Non-conforming loans are considered to have higher risks as they don’t fall under any guidelines. You have to go through a more strict qualification procedure, and you must prove your income, availability of down payment, and home appraisal.
Non-conforming loans are not backed up by the government and do not meet Freddie Mac’s loan requirements. However, they are a good option for those who are looking for larger loans or who are looking for options that better suit their needs.