3 Reasons To Apply For A Non-Conforming Mortgage Loan
While some people meet the criteria for regular government-sponsored mortgage loans, others can't use these conforming financing options. However, this doesn't mean that they can't get a mortgage to buy a property; they might simply have to look at non-conforming products.
When might you need a non-conforming mortgage?
1. You Want to Buy a High-Value Property
Some people have to take out non-conforming loans because they want a mortgage to cover a high-value property. The property they want to buy is more expensive than the limits set by regular conforming loans.
Conforming loans won't necessarily cover a property that is worth more than your set limits. If you can't cover the cost difference by making a larger down payment, then you have to find a different way of borrowing the money you need.
Your best option in this scenario is often a jumbo mortgage. Lenders don't use general limits on these non-conforming mortgages, so you can borrow higher amounts.
2. You Have an Impaired Credit History
You need a decent credit score to qualify for a government-sponsored mortgage. If you've had financial problems in the past, such as bankruptcy, then you might struggle to get a home loan even if your finances are back on track again now.
At this stage, your credit score and record won't be good enough for a conforming loan. You could wait for things to improve; however, this could take years.
Here, you can work with a lender that accepts mortgage applications from people with lower credit ratings. Your mortgage costs are likely to be higher because you are an increased credit risk, but these lenders might be your best chance to get back on the mortgage ladder.
3. Your Debt-to-Income Ratio Is Too High
Mortgage lenders check your debt-to-income (DTI) ratio when you apply for a loan. This ratio is a percentage that tells them how much money you have to spend out of your income to pay down existing debts.
If you have a higher-than-average DTI, then you aren't likely to get a regular conforming mortgage. You might need to find non-conforming loans which accept higher DTIs. Some lenders will let you borrow money here; however, you might have to meet extra conditions such as providing a co-signer on your borrowing.
To find out more about how non-conforming mortgage loans work and whether this is an option for you, talk to mortgage loan agents.
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