October 2, 2019

Understanding Non-Conforming Loans

Who are Fannie Mae and Freddie Mac?

The Federal National Mortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are government sponsored enterprises (GSEs) established by congress to mitigate risk to investors and increase availability of affordable home loans. To do this, they buy home loans and repackage them for sale on secondary markets which creates a flow of lendable funds back to mortgage originators.

What is a non-conforming loan?

Regulated by the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac both adhere to a set of underwriting standards that determine whether a loan qualifies to be purchased. Loans that fall outside of these standards are referred to as non-conforming loans.

When is a non-conforming loan a good choice?

Private lenders and investors who fund non-conforming loans have the freedom to set their own underwriting standards based on their individual business practices and tolerance for risk. Non-conforming loans typically carry a higher interest rate but can be a big help for some buyers.

Jumbo loans are a common example of non-conforming loans. These are home loans that exceed the FHFA loan limit of $484,350* and must be funded through a private lender. Jumbo loans typically require a larger down payment and may have stricter credit and income criteria.

Non-conforming loans can also be used to shorten the wait time to buy a home after a bankruptcy and may have different documentation requirements that can make it easier for self-employed borrowers to verify income.

How do I apply for a non-conforming loan?

Reputable mortgage lenders, like the Boles Group at Bay Equity Home Loans in Gilbert develop relationships with a variety of well-vetted funding sources to ensure they have access to an assortment of reliable loan products designed to meet the diverse needs of today’s home buyers.

The best first step when considering a home purchase is to talk to a Boles Group loan officer who can review your situation and recommend the best loan for your individual circumstances. If a non-conforming loan is your best option, the Boles Group lending professionals at Bay Equity Home Loans in Gilbert will walk you through each step of the process.

*FHFA Loan limit of $484350 is current as of the publication date of this article on Sept. 19, 2019 and may be subject to change.

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Bay Equity Home Loans – Boles Group is a team of lending professionals located in Gilbert, Arizona and licensed to originate home loans for purchase or refinance in nine states (AZ, CA, CO, ID, MN, NM, NV, OR, WA). Boles Group lending professionals have the knowledge and experience to create solutions where other lenders create problems. The team prides itself on responsive, accurate communication and is highly regarded by clients and business associates alike.