Non-Conforming Loans

summary of non-conforming and government sponsored loans

There are other non-conforming and government sponsored mortgage loans that may fit your lending objectives. Check these programs to see if you qualify.

Below are four (4) quick summary guides other mortgage loan types:

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non-conforming loan types

Jumbo Loans

Jumbo loans are used to finance high-expensive homes. The loan balance for jumbo loans are above the maximum loan amounts established by Fannie Mae and Freddie Mac. The interest rates on jumbo loans are generally higher than rates on conforming loans.

Advantages:

  • homeowners are looking to finance a home that is above the loan limits set by Fannie Mae / Freddie Mac
  • most jumbos allow borrowers to select the type of mortgage loan — fixed, ARM, hybrid

Disadvantages:

  • the APR is generally higher than other conforming loans
  • fixed rate loans can range anywhere from 0.11 to 0.77 points higher, depending on the region
  • adjustable rates are 0.01 points higher, but tend to narrow as the ARM adjusts. Many of the jumbo mortgage loans are ARMs.

View more detail information and illustrations

(note: links to our companion site
www.SayLending.com)

non-conforming loan types

Home Construction Loans

Home construction lending is a little different. First, you will be given a construction line to pay subcontractors and suppliers. Then at the end of the construction project, you will use a residential mortgage to pay off the construction line.

Advantages:

  • construction loans are designed to finance custom building by using a line of credit to pay contractors
  • at the end of the construction, lenders will pay off the credit line with a residential mortgage
  • borrowers can select the type of residential mortgage — fixed, ARM, hybrid.

Disadvantages:

  • the APR is generally higher than other conforming loans
  • many lenders do not specialize in construction/perm loans.

View more detail information and illustrations

(note: links to our companion site
www.SayLending.com)

non-conforming loan types

Government Sponsored Loans

FHA, VA, and other government sponsored programs are mortgage loans made to low-income home buyers that meet certain requirements. Generally these loan programs require less than 20% down payment and the interest rate is typically lower.

These programs do not lend money. They only insure the loan against homeowner default. Rates are generally lower than conventional lending. Plus the qualifying parameters may be loosened.

Advantages:

  • these programs require less down payment than conventional loans
  • interest rates on government sponsored programs are lower than conventional loans
  • FHA / VA loan can be assumed under guidelines
  • FHA / VA debt ratios are higher than conventional loans
  • VA Loans can be issued with as little as zero down
  • another advantage is that the income requirements for these programs are less stringent — both the income and debt ratios are a little higher when qualifying for a loan

Disadvantages:

  • FHA loans limit the amount you can borrow
  • FHA / VA closing costs are higher than conventional loans
  • VA loan processing takes longer than conventional loans

View more detail information and illustrations

(note: links to our companion site
www.SayLending.com)

non-conforming loan types

A- Mortgages

"A-" mortgages are for applicants who don't have perfect "A" credit but are working to clean up their report. These conforming "A-" loans carry competitive interest rates that are lower than B, C and D paper.

  • These loans are temporary loans
    until the applicant can qualify for conforming "A" loans. The interest rate is better than B, C and D loans
  • For Those with Less-Than-Good-Credit
    loans that do not meet the credit requirements of Fannie Mae and Freddie Mac are referred to as B, C and D paper loans.
  • "Sub-prime" lenders underwrite B, C and D loans
    however, you are not guaranteed approval. Each lender has their own criteria on approving applicants with less-than-good credit.
  • Loans of this type are made to applicants
    who have filed for bankruptcy, foreclosure and who generally have bad credit.

View more detail information and illustrations

(note: links to our companion site
www.SayLending.com)