Non Conforming Home Loans

If your credit isn't all that great, you may not qualify for a regular conforming loan. However, do not get discouraged. There is still a good chance you can qualify for a non conforming home loan.

So what are the differences between a conforming home loan and a non conforming home loan? In it's simplest terms, a non conforming home loan is when the lender determines that you have a job and can make payments. Your credit score is only used to help assign your interest rate and the amount of the loan you can get. The opposite is true with a conforming loan.

Not all loan officers will write a non conforming loan however. It not that they aren't allowed, but rather it takes a bit more work on their part to write them. Conforming loans look at all kinds of things at once to determine your likelihood of getting a loan, such as your credit score, your job history, any missed or late payments on other loans, down payment amount available and your income to debt ratio.

Non conforming home loans are generally given a higher interest rate. This can vary from as low as 1% extra to as much as 6% or more above the regular interest rates. The reason is, lenders feel non conforming home loans are a bit riskier for them to give out. Overall, it's a small price to pay for someone to take a risk on you when you don't have the best credit to start with.

Non conforming home loan lenders use a guideline similar to the following when issuing your home loan. First, they look at your debt ratios (or how much you owe to other lenders). Then they look at your credit score to see what kind of interest rate they can offer you as well as the amount of funds you have available for closing.

So, before you think there is no way you can ever get a home loan, the non conforming home loan may be just what you need.