What is a non-conforming mortgage?

Answer 1

As the word "non-conforming" word already states, a non-conforming mortgage is a mortgage that does not adhere to conforming and or federal lending standards. An FHA- loan and a conventional loan are conventional mortgages. A mortgage normally consists of a substantial down payment, paid by the borrower and the actual mortgage paid by the lender. To make mortgages available to a wider range of borrowers, some lenders do not require a down payment at all if the borrower has excellent credit. For example the first mortgage then might be 80% of the loan amount or purchase price and the second mortgage will cover the additional 20% of the purchase price. In general the second mortgage then will be at a substantial higher interest rate. Sometimes the second mortgage is even issued by a different lender.

A second example can be a borrower who has very low credit score and would not qualify for federal or conventional loan, because of his credit risk from past financial issues and now makes good money to buy a house. Here the the lender will waive certain requirements yet charge a substantial higher interest rate.

Here are targeted users for Non-conforming loans:

1. People with Bad Credit Record or Rating.

2. People with Unstable Income.

3. Low doc people.

4. People without Sufficient Deposit.

5. People who are security impaired.

6. People who are Non-Residents of the country.

7. People who are close to retirement.