If you need to get a loan but believe you are not a good fit for conventional loans, there is an alternative. Non-conforming loan exists to cater to homebuyers who do not meet guidelines set by the government-sponsored enterprises like Fannie Mae and Freddie Mac. This happens if you plan to borrow more than what these programs can offer, or if you failed to meet some of the qualifications.
If that is the case, this article will explain the types of non-conforming loans available and help you assess your options.
Your Non-Conforming Loan Options
These loans are specially designed for those who do not meet the criteria of conventional loans. When approved, you can get a more lenient and less risky mortgage loan. If you are interested in this category, here are the types of loans available:
- FHA Loans. This mortgage loan is insured by the Federal Housing Administration (FHA) and provided by FHA-approved lenders. These are meant explicitly for low-to-moderate-income borrowers who also have low credit scores or do not have enough cash to meet the minimum down payment, which are the typical requirements for a conventional loan. Unlike the usual 20 percent down payment requirement, the FHA loan might only ask for 3.5 percent. The only requirement is that you meet the minimum credit score of 580. If your score is between 500 to 579, you may still qualify as long as you can pay up to ten percent of the down payment.
- VA Loans. If you are a veteran, an active service member, or a deceased service member’s immediate family member, you can qualify for this loan. You can secure a home with little to no down payment from private lenders. They do not require any private mortgage insurance (PMI), no-prepayment penalties, and also offer other generous terms. It is a program specially created to help service members get homes at competitive prices.
- USDA Loans. If you have no budget yet for the down payment, the US Department of Agriculture (USDA) mortgage program can be an excellent option. It also consists of three possible loan programs depending on the setup you need. There is an option for home improvement loans, a direct loan from USDA with interest rates as low as one percent, and a loan guaranteed by the USDA but issued by a local lender.
Of Special Interest: Jumbo Loans
When your application does not qualify with conventional loans because your desired amount is larger, this is your best option. This type of loan is specifically for those buying luxury properties and homes.
The limit varies depending on what the FHFA sets, which also depends on many factors. Contrary to what most people think, the Jumbo loan does not necessarily have higher interest rates than conventional loans.
Many of these non-conforming loan options are designed to help people in lower-income brackets and those serving the country get their dream homes. The zero to low downpayment and low interest rates are already a big help to individuals and families looking to obtain their dream home.
To learn more about each of your various loan options, contact New Frontier Financial at (469) 886-8300. We are your trustworthy loan officers from Dallas who can help you find the best home loan for your situation and guide you through the entire process in a fast and easy way.