Non Conforming Home Loan

Non conforming home loans are those that exceed amounts allowed by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Association). They are usually over the amount of $360,000. Fannie Mae and Freddie Mac are government sponsored organizations that help facilitate the availability of home loans by investing government funds throughout the country. These types of contracts are also referred to as "Jumbo" loans. They typically have a higher interest rate and different down payment requirements for the borrower. Amounts offered through this method can be granted to the amount of 2 million dollars.

There are a number of private investors that are looking to invest in a non conforming home loan, and mortgage brokerages that specialize in this area act as third party intermediaries between borrowers and the private investors. Unlike traditional lenders, non conforming home loan brokerages can approve a deal faster within their own organization. There is typically no red tape to crawl through because these financial deals are not government regulated. The brokerage has the liberty to approve or disapprove the terms, depending on standards given by their private investors.

When a borrower meets a private lender's qualifications, the brokerage may approve the terms and distribute the funds. Most non conforming home loans require considerable collateral or equity in the building being purchased. There is less personal documentation needed to qualify for these contracts. Some require no income verification and no down payments. Typically, investment properties and second homes qualify for non conforming home loan status. In addition to higher amounts, they are also offered to foreign nationals who would not otherwise qualify for a conventional contract in the United States. Jesus advises us, "For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it" (Luke 14:28). Qualifying for a good deal does not automatically mean a Christian should run out and sign on the dotted line. Because we are stewards of God, we must handle our finances in a way that pleases Him. Consult God first before entering into any kind of contract.

A borrower's credit score will directly determine the interest rate. Non conforming home loans already have higher interest rates, but the lower a borrower's credit score, the more the interest rate soars. The best method a borrower has of lowering those high interest rates is to improve his credit score. The fastest way to improve a credit score is to pay down credit card balances to at least 20 percent of their limits. This lowers the balance-to-credit-limit ratio and can raise a credit score up to 30 points in as little as 30 days. Raising the credit score before applying for any non conforming home loans is wise.

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