When it comes to obtaining a mortgage, borrowers usually have two options – a traditional mortgage from a bank or a non-conforming mortgage from a lender like Franklin Mortgage Holdings. If you’re considering a non-conforming mortgage, you’ll need to do your research to understand what it is and what it entails. In this article, we’ll dive into some key things you need to know about non-conforming mortgages.
A non-conforming mortgage is a loan that doesn’t meet the guidelines and criteria set by Fannie Mae and Freddie Mac, the two major government-sponsored entities that back traditional mortgages. Non-conforming mortgages are designed for borrowers who don’t meet the strict requirements set by traditional lenders, such as those with low credit scores, high debt-to-income ratios, or unique property types.
Non-conforming mortgages come in various forms to serve different borrowing needs. These include:
Jumbo loans: Jumbo loans are non-conforming mortgages for higher loan amounts that exceed Fannie Mae and Freddie Mac’s borrowing limits. These loans are typically for borrowers seeking to finance luxury properties or reside in high-cost areas.
Non-QM loans: Non-QM loans are non-conforming mortgages that don’t meet the “qualified mortgage” criteria set under the Dodd-Frank Wall Street Reform and Consumer Protection Act. These loans are for borrowers with alternative income sources (e.g., self-employed), high net worth, or complex financial profiles.
Bridge loans: Bridge loans are non-conforming mortgages for short-term financing to help borrowers acquire or renovate a property while waiting for long-term financing. These loans are ideal for house flippers, real estate investors, and commercial property owners.
Non-conforming mortgages offer several benefits and drawbacks for borrowers. Some of the pros include:
Access to financing: For borrowers who don’t meet the traditional lending criteria, non-conforming mortgages offer a means to secure financing for their home purchase.
Customized loans: Non-conforming mortgage lenders like Franklin Mortgage Holdings offer personalized loan options that cater to borrowers’ unique situations.
Streamlined processes: Non-conforming mortgages may have less stringent documentation requirements, making for faster processing times.
Some of the cons of non-conforming mortgages include:
Higher interest rates: Non-conforming mortgage lenders offset the higher risk of lending to borrowers who don’t meet the traditional criteria by charging higher interest rates.
Higher fees: Non-conforming mortgages may come with higher fees, such as origination fees and prepayment penalties.
Limited lenders: Non-conforming mortgages may not be available from all lenders, limiting your options and potentially making it harder to compare rates and terms.
Deciding whether a non-conforming mortgage is right for you depends on your financial situation and borrowing needs. Consider factors like your credit score, income, property type, and the amount you need to borrow. Compare the rates and terms of different lenders to find the best option for you. Consider working with a reputable non-conforming mortgage lender like Franklin Mortgage Holdings to get personalized guidance and support in your home financing journey.
A non-conforming mortgage may offer a means for borrowers who don’t meet traditional lending criteria to secure financing for their home purchase. Understanding the types of non-conforming mortgages available, their pros and cons, and the factors to consider when choosing a lender can help you make an informed decision. If you’re considering a non-conforming mortgage, reach out to a reputable lender like Franklin Mortgage Holdings to discuss your options and get personalized guidance in your financing journey. Contact us today to learn more!
