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A Non-Conforming Loan is one in which the borrowers loan request does not meet the requirements of the Secondary Mortgage Market. This can occur due any one of the following items:
Income documentation- the need for a no income verification loan.
Low Downpayment on Jumbo loans, Multi-family homes, Second Homes or Investment Properties.
The need to take greater cash out during a refinance loan.
Non Citizen/ Non-Resident Alien
Condo Projects over 5 floors
Non Conforming loans are offered by a number of different investors and are easily found. The interest rates on these loans may vary greatly depending on what your needs are. Typically for each item that does not conform to the secondary market you may pay a premium on the interest rate.
Example 1
You want to purchase an investment property but do not want to put down the secondary market requirement of 30%. A non-conforming program may allow you to put down just 10%, however, the rate might be as much as 1% higher than the conforming program.
The same borrower would also be able to get the loan with a No Income Verification option for another small increase in the interest rate.
While you may pay a premium for these options they may well be worth it. Remember to price out all your options and weigh them against each other. All loan programs will have their pros and cons.
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