Non-Conforming loans

A non-conforming loan is a home mortgage that does not meet the criteria of Fannie Mae or Freddie Mac for various reasons including loan amount, loan characteristics or underwriting guidelines, but still considered conventional. Jumbo loans are an example of conventional loan that does not meet Fannie Mae or Freddie Mac guidelines.  Non-Conforming loans usually incur a higher rate and points.

Jumbo mortgages are loans which are larger than the allowed loan that the Fannie Mae can accept.  It generally carries an interest rate as much as one-half percent higher compare to Fannie Mae loans. Private Mortgage Insurance or Lenders Mortgage Insurance and usually non voluntary insurance fees are tacked onto the purchase of a home if you take this very large loan, if you don’t have a 20% down payment or 20% equity. Private Mortgage Insurance (PMI) or Lenders Mortgage Insurance (LMI) is an insurance policy protecting lenders from potential default of borrowers.  The policy is purchased by the lender and the premiums are passed along to the borrowers as a fee included in the monthly mortgage payment.  Mortgage insurance is typically required for mortgages for which the down payment is less than 20% of the purchased property’s value.

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