Conforming loan is a loan which you can get at any financial institution, when you have no late payments within 12 months, have a stable job, can afford substantial down payment and your income to debt ratio is less than 38%.
Non conforming loans are those which don't meet the standards of the lenders. Here what you are judged is that you have a job and can make the payments. Only your credit is used to determine your interest rate and the loan amount to calculate the home ratio. This ratio is termed as your "LTV" or "Loan to Value".
Non conforming lenders are those who may lend to borrowers who are in foreclosure or who are currently in a bankruptcy. Borrowers in these situations have a extremely poor credit. In this case the lenders protect themselves by keeping the LTV low, near about 65% to 70% of the appraised value of the property. Most lenders write non conforming loans as they require a lot more work.
Non- conforming loans often termed as Jumbo loans have limits higher than maximum loan amount allowed by government- sponsored agencies like Freddie Mac and Fannie Mae. The interest rate for these loans are slightly higher than conforming loans as the risk involved in approving these loans is higher.
Those borrowers who have poor credit score and large debt amounts can take advantage of this type of loan. This loan is particularly helpful to people who want to purchase expensive homes and is a good alternative to those who fail to qualify for conforming loans.
These loans are available with either fixed or adjustable rates and have more liberal ratios for loans with an LTV 90% or less.
Lenders offering this type of loans are not as rigid as those of other conventional type. As rightly mentioned by Blue, they generally keep a protection for themselves without producing much trouble to the borrowers.
A direct lender is a financing company or lending institutions including a bank who deals directly with its customers. No middleman or mortgage brokers are involved.
Direct lenders fund their own loans. They fit into the categories of mortgage bankers or portfolio lenders usually.
I shall advise to go to a mortgage broker first to get the best deal. But the broker should be a good one with good reputation in the market.
It may cost you more but the service provided by good brokers will help you a lot. These professionals can help in shopping the mortgage market and choose the best lender for you as per your requirement.
The other advantage is that you need not think of the different documents to be prepared and the procedures involved. They are going to do it for it and that too with efficiency.
But you should consult your friends and relatives for any recommendations about a broker before choosing him if you have that option, otherwise try to find his market reputation and judge the quality of service provided by him.
Posted: Tue Mar 21, 2006 7:42 pm Post subject: I'm new
Hi...I'm a new mortgage broker and I'm having a few problems reading a rate sheet...and understanding the terminology. I was wondering if you can suggest any websites that could help me. Thank you.
Open your heart and mind you will find everything behind your back.
You have already discovered what you are looking for, it is the biggest community in mortgage industry and it is always better to learn from where it all started.
I have been with this community from a long time.
You can join us and together we can help each other in understanding the industry in a better way.
You are always welcome with your queries.
Adonis _________________ Procrastination is the enemy of your financial sucess
Posted: Wed Apr 12, 2006 11:05 am Post subject: 80/20
My son has a loan called an 80/20, and he has been advised to get his home re-appraised so the lended can lend him 20.
What does 80/20 mean, and should he do this.
Thanks
This is a combination of two loans. The first one amounts to 80% of the purchase price while the second one amounts to remaining 20%.
The first one can be a fixed rate or an interest only and the second is usually a home equity loan, home equity line of credit or an adjustable rate mortgage. The rate on the second mortgage is higher.
This is a good option if your son wants 100% financing on the property. You can check this section on 80/20 mortgage loan for more detail.
Samantha
