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

Wachovia Posts Loss, Exits Wholesale Origination Business Mortgageorb, CT - Jul 22, 2008 By MortgageOrb.com on Tuesday 22 July 2008 Consistent with previously announced expectations, Charlotte, NC-based Wachovia Corp. has reported a net loss in ...

ARM resets to hit peak this summer Chicago Tribune, United States - Jul 13, 2008 By Renae Merle | The Washington Post The number of homeowners facing an increase in their subprime adjustable-rate mortgage payments will peak this summer, ...

LendingTree Names New Lender Sales Team MarketWatch - Jul 22, 2008 ... source of interested borrowers looking for home loans such as new purchase mortgage, refinance and home equity, as well as personal and auto loans. ...

ABC News

Money Managing Matters: Three Dos, Don'ts ABC News - Jul 17, 2008 If you have an adjustable rate mortgage, refinance into a fixed rate one. Interest rates on adjustable rate mortgages are only going to go up, ...

DEBT ADVISOR Columbia Daily Tribune, MO - Jul 21, 2008 Second, your mortgage-refinance issue is just the tip of the iceberg. Many people don’t know a negative credit history also will hurt you if you have to ...

Tips on obtaining money through refinancing Fall River Herald News,  USA - Jul 3, 2008 Here are a couple of pointers for those considering mortgage refinance to take cash out of their home: The traditional way of judging the market value of a ...

Reuters

Foreclosure-rescue legislation benefits both borrowers, lenders Arizona Republic, AZ - Jul 12, 2008 by Julie Hirschfeld Davis - Jul. 13, 2008 12:00 AM AP The foreclosure-rescue legislation moving through Congress would let financially strapped homeowners ... US housing agency expands mortgage aid program Reuters all 81 news articles

Market rescue, round two Livemint, India - Jul 14, 2008 The stocks of the two mortgage refinance institutions fell to levels last seen 15 years ago on concerns about their bearing the brunt of the exposure to ...

Mortgage Rates Fall HULIQ (press release), NC - Jul 16, 2008 Mortgage refinance applications also picked up over the week as homeowners take advantage of falling mortgage rates. The 30 year fixed mortgage rate ...

National Settlement Agency President Pleads Guilty to Embezzling National Mortgage News, DC - Jul 16, 2008 By James Comtois After stealing more than $13 million in mortgage refinance proceeds, the former president of National Settlement Agency pleaded guilty ...