5 Benefits of Non-Conforming Loans
Unlike conforming loans, non-conforming mortgage loans don’t follow the GSE (Government Sponsored Enterprises) guideline. In addition, these types of loans also don’t fit the eligibility criteria of bank mortgages or home loans. Therefore, you can’t resell these non-conforming loans to the biggest mortgage buyers in the US — Fannie Mae or Freddie Mac. Moreover, if the loan is above the limit set by Fannie Mae or Freddie Mac, it falls in the category of a non-conforming loan.
Reasons like poor credit history, the unconventional use of mortgage funding, and the amount of mortgage exceeding the conforming loan limit is why people prefer to go for non-conforming loans. However, these loans also have other benefits, making them a valuable mortgage option.
Here are some of their benefits.
More Purchasing Options Instead of Just Buying a House
Do you want to buy a modular house or raw land, where you build a house following your own home designs? If yes, going for traditional forms of mortgages like bank loans isn’t the feasible option. Bank mortgages have strict terms, specifying where you get to use the finances they give. In most cases, this means that you can only use a bank mortgage to get a typical house.
But a non-conforming loan will help you decide your living situation. Through a non-conforming loan, you can get a condo or a place in the country club. You know by now that non-conforming loans do their own thing, and there is a long list of living facilities you can purchase through a non-conforming loan.
These homes include non-warrantable co-ops and condos, multi-unit condos, timeshares, fractional ownerships, and living units in assisted communities. Moreover, you can also purchase a house in a place that requires a membership, like country clubs or golf clubs. You can also buy houses that are currently in litigation.
However, if you’re buying a place in a multi-unit living facility, the private lender also needs to consider the developer’s credit score before accepting your non-conforming loan application.
More Credit Leniency
As we discussed above, conforming loans have many terms and documents that you have to provide to get a bank mortgage. But that’s not all! Most banks in the United States ask for a credit score of 620 or more. But do you know the credit score limit of non-conforming loans? Let us tell you that it’s nothing!
That’s right! Non-conforming lenders don’t ask for your credit score, which means that even people with a low credit score or bad income history can apply. However, this doesn’t mean that anyone can get a non-conforming loan without any income source. This means that the lenders can set their own credit terms and often make them lenient enough for most borrowers.
Moreover, conforming loans also ask for a debt-to-income (DTI) ratio of 42% or less, which means that people with a DTI greater than 42% aren’t eligible for a conforming loan.
Credit leniency is one of the reasons why people with low credit scores and reports opt for non-conforming loans instead of banks. Discuss your income history with a professional mortgage counselor, and they will guide you further.
Larger Loan Limits
Most banks and other traditional lenders follow the guidelines set by Fannie Mae or Freddie Mac. According to these guidelines, traditional lenders refuse to lend a loan greater than $548,250 in most US states and $822,375 in higher-cost areas. Then, what should you do if you want to purchase a house that costs more than this amount?
As discussed above, non-conforming loans don’t adhere to the principles set by Fannie Mae or Freddie Mac, which means that they extend larger loans than $548,250. A type of non-conforming loan, jumbo loans, allows you to get a higher loan and purchase a more expensive property. This is perfect for people who want to purchase their dream house.
Lower Down Payments Than Bank Loans
Most conforming mortgages have a down payment of 3% or more of the house price, which means that home buyers must pay 3% to secure the mortgage and move forward with monthly loan payments. Moreover, if you’re a first-time homebuyer, you need to pay a 3.5% minimum down payment to get an FHA loan.
However, just like all the other principles, non-conforming loans also don’t adhere to the down payment rule and require lower down payments than bank loans. Even if you don’t have an amount saved for a down payment, you can still get a non-conforming loan.
More Flexible Terms Than Other Conventional Mortgages
If you visit a bank to get a home mortgage, you’ll be shocked to find that you have to fulfill many requirements to qualify for a bank mortgage. You have to provide your recent bank statements, federal tax returns, real estate property details, pay stubs of the last 30 days, source of income proofs, and so much more. These are a lot of terms, right?
On the other hand, the most significant benefit that non-conforming loans offer is more flexibility than mortgages through banks or other conventional sources. As the non-conforming name loan suggests, they’re here to break the rules and terms and go against the conventional methods.
The underwriting standards in non-conforming loans vary from lender to lender. However, many private lenders often change their terms to match borrowers’ requirements. Moreover, non-forming loans private lenders also provide personalized solutions to borrowers with unique mortgage requirements.
Get Non-Conforming Mortgage Loans in NY
With lower down payments, flexible terms, and the opportunity to buy the living facility they want, we recommend people to go for a non-conforming mortgage loan, specifically if they aren’t eligible for a bank loan. At Atlantic Home Capital, we provide non-conforming mortgage loans in seven states, where you can get Condo and Coop Mortgages Ft Lauderdale, alongside multiple other options.
In addition, we only provide loans through licensed mortgage lenders, making the loan process easier for borrowers. You can also get more details through our experienced mortgage consultants Fort Lauderdale.
