Non-conforming Home Loans vs Conforming Loans

The simple definition of a "non-conforming home loan" is: You have a job and can make the payments. Your credit is used only to determine your interest rate and the loan amount to value of the home ratio. This ratio is referred to as your "LTV" or "Loan To Value". There are many lenders who will lend to borrowers who are in foreclosure or who are currently in a bankruptcy.

Borrowers who are in these situations often have the worst possible credit. Lenders protect themselves by keeping the LTV low, about 65% to 70% of the appraised price of the property. By doing this, the lender is very well protected. If the borrower goes into foreclosure again with the new lender, the LTV is low enough that the lender can take the property back, sell it at a discount for a quick sale, and still pay off the debt.

The lender rarely cares if there are other mortgages against the property, as long as the lender is in the first position. You see, when a lender takes a property back from a borrower the first lien position gets the proceeds of the sale first, then the second, then the third, etc. Rates for these types of loans are usually 1% to 6% higher that conforming rates.

CONFORMING LENDERS' GUIDELINES

Lenders use three qualifying guidelines to determine what size mortgage you are eligible for. They are as follows:

1. Debt ratios:
Your monthly costs (including mortgage payments, property taxes, insurance) should total no more than 28% of your monthly gross (before-tax) income.

Your monthly housing costs plus other long-term debts should total no more than 36% of your monthly gross income.

Basically, lenders are saying that a household should spend not more than about one-fourth oits income (28%) on housing and not more than about one-third of its income (36%) on total indebtedness (housing plus other debts). Lenders feel that if they follow these guidelines, homeowners will be able to pay off their mortgages fairly comfortably and lenders will not have to worry about loan defaults and foreclosures.

2. Credit:
Any late payments must have good explanations and generally no more than one 30-day late payment is permitted within 12 months.

3. Funds to Close:
You must have the down payment, which must be your own funds, and the closing costs. In addition, you must have at least two month's extra payments in the bank.

NON-CONFORMING LENDERS' GUIDELINES

1. DEBT RATIOS:
Every non-conforming lender has a different set of guidelines; therefore, this section should be used only as a general example. These types of lenders are saying that a household should spend not more than about one-half of its income (50%) on housing and not more than about two-thirds of its income (60%) on total indebtedness (housing and other debts).

Lenders feel that if they follow these guidelines, homeowners will be able to pay off their mortgages fairly comfortably and lenders will not have to worry about loan defaults and foreclosures. These guidelines can be pushed with other compensating factors.

2. Credit:
Used for calculating risk of loan (interest rate).

3. Funds to close:
Can come from many different sources; e.g., seller carry-back, gift letter, equity.

Special Loans (http://www.special-loans.com) specialises in providing secured finance where banks will not. If you have credit problems, are fully employed or self-employed, have income issues or employment issues, we have the best solution for you! We provide Non-conforming home loans offering wholesale home loan rates as well as Standard Home Loans, unsecured personal loans, refinance products.

http://www.special-loans.com

---

Mortgage Reduction Solutions

USA ECONOMIC CONDITIONSToday's sluggish economy has left millions of people... Read More

Home Equity Loans Can Provide Cash in a Hurry

Think About the Long Term. Estimate how long you expect... Read More

What is a Self-Certification Mortgage?

A Self-Certification mortgage is a mortgage designed for people who... Read More

Refinancing Your Home - Is the Time Right?

Refinancing your home is a major decision not to be... Read More

Bad Credit Mortgage Lenders - Things You Should Know About Subprime Lenders

Interest rates and fees vary between subprime lenders just like... Read More

First Time Home Owner Mortgage Loans

First time home owners are sometimes surprised at the complexity... Read More

The Truth behind Pension Mortgages

A pension mortgage may seem lucrative at the first sight.... Read More

The Worst Way to Shop for a Home Mortgage

You've found a house that is perfect for you. It... Read More

How do I know what is the best Second Mortgage Home Loan for me?

The information in your credit history helps mortgage lenders decide... Read More

How to Utilize Your Cash Investment in Your Home

Have you ever noticed how hard it can be to... Read More

What is a Home Equity Loan?

A home equity loan is a loan that is guaranteed... Read More

What to Really Expect for Closing Costs

Closing on a property is a very challenging time for... Read More

What is a Repayment Mortgage?

A repayment mortgage is the type of mortgage that most... Read More

Hard Money Loans - Reasons Why You Might Want To Try Applying With A Subprime Mortgage Lender

Before you apply for a hard money loan, try applying... Read More

Online Mortgage Loan Companies Are Convenient

There are many reasons to use the internet to take... Read More

Free Home Equity Loan Information

Home equity loan information can sometimes be confusing and misleading.... Read More

Bad Credit Mortgage Loans ? How To Get Approved

Persistence is the key working toward getting approved for a... Read More

Who Could Benefit From A Reverse Mortgage?

What is a "Reverse Mortgage?"Also known as a Home Equity... Read More

How To Choose Your Mortgage Loan

Are you excited about purchasing your first home? Or maybe... Read More

Zero Down Mortgage Loans - Is 100% Financing a Good Idea and Can You Get Approved?

Are you wondering if you can get approved for a... Read More

Benefits of a Remortgage

There are many benefits in choosing a remortgage, some of... Read More

A Home Loan Can Help You Own Your Dream Home

Owning your dream home need not just be a dream.... Read More

Mortgage Advice

In the US today more households have mortgages than ever... Read More

What is a Commercial Mortgage?

A commercial mortgage is a loan that uses commercial property... Read More

Fixed Rate or Adjustable?

Fixed rate or adjustable rate mortgages are two choices of... Read More

Who Else is Ready to have Their Money Work Harder for Them?

What does it mean to refinance? Why would anyone want... Read More

Money Smart Homeowners Use this Mortgage Strategy Every Time

There are currently more than 50 million home mortgages in... Read More

How To Get The Best Home Equity Loan

Are you wondering how to get the best Home Equity... Read More

Fixed-To-Adjustable-Rate-Mortgage

What is a Fixed-To-Adjustable Rate Mortgage?This type of mortgage offers... Read More

Avoiding Foreclosure Scams

If your mortgage company is threatening foreclosure, there are things... Read More

Adjustable Rate Basics

An adjustable rate loan, most simply stated, means that your... Read More

Why You Should Not Get Hung Up on the Interest Rates!!

This is what a mortgage can do for you!AND Why... Read More

Carolina Mortgage Loans

You're selling your home and are looking to relocate to... Read More