What is a Non-Conforming loan?
Also known as a jumbo mortgage, a non-conforming loan is a mortgage arrangement that exceeds what is considered the average limits associated with government support mortgage loans. The concept of a non-conforming loan is more common in the United States than in other countries. In the USA, the identification of a mortgage as a non-conforming loan is normally based on how the terms and conditions of the loan compare to guidelines utilized by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. The main difference between a non-conforming loan and a conforming real estate loan has to do with the total amount of funds extended by the lender to a borrower. Conforming loans carry maximum limits on the total amount of the loan based on the type of real estate purchase that is completed using the proceeds from the loan arrangement. There is one limit for single family dwellings, a different limit for dwellings providing living space for two families, and h
It is important to be aware of the distinction between low-doc and non-conforming loan products. While both waive the requirement to sight and retain copies of the applicant’s tax returns and financial statements, low-doc loans are almost exclusively available to people with an unblemished credit history, are mortgage insured, and generally do not want to borrow more than 80 per cent of the security’s value. Non-conforming loans on the other hand are mortgages that do not conform to a lender’s typical loan underwriting criteria. This may include situations where the applicant has a poor credit history, or who may not have been employed long enough to show a history of earning an income. Non-conforming loans may exceed 80 per cent of the security’s value and the interest rate is based on the severity of the credit history. A low-doc loan is generally made to a borrower with a clean credit history and therefore the most important factor for the lender to consider is the value of the asse
