Understanding Non Conforming Home Loans

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Every day people find themselves in financial hardship due to unfortunate circumstances outside of their control. Before long they fall behind on their house or car repayments, are unable to pay the credit card bills, or struggle with other commitments such as council or water rates which can result in a writ or court judgment filed against them and listed on their personal credit report.

Non conforming home loans are a new range of home loan products that have come into vogue over the last few years. Essentially they are an extension of private funding that was arranged by mortgage brokers for their client. The broker would arrange a funding source and offer more flexible funds to the borrower without the traditional credit scrutiny.

Non conforming lenders have packaged and put processes in this style of funding that now allows many more people access their suite of products that are tailored for people whose situations are outside the norm.

Bad Credit Home Loans

Through a Non conforming lender a borrower may purchase or refinance their home even if they had some blemishes on their credit history or have mortgage arrears. Previously the borrower would have had no option and in many cases had their homes sold from underneath them.

Specialist Situation Home Loans

Although some banks have relaxed their need for the borrower to have 5, 10 or 20% deposit, the mortgage insurer would still ask for some form of savings history before they would approve the loan. With non conforming home loans the deposit can come from any legal source. Another instance might be where someone is short term employed, banks and mortgage insurers will require the borrower to be in their job for 6 months at least and preferable in the same industry for 2 years.

Non Conforming Low Doc loans

Low doc loan is a loan where the borrower is self employed and does not have completed tax returns necessary to prove income for the loan. Many banks now have low doc loans but with non conforming lenders the borrower can also have a bad credit history, mortgage arrears and also go up to 90% LVR where traditional lenders will only go to 80% LVR (Loan to Valuation Ratio).

How can non conforming lenders do all of this I hear you ask…

Non confirming lenders do not have mortgage insurance; this is a big part of the equation taken care of. Non conforming lenders cover the risk by rate, the more risk for the lender and the higher the LVR the higher the interest rate. Non conforming loans have allowed many people to take back control of their finances via a debt consolidation loan and put them back on track through refinancing all of their debts into one monthly repayment.

If you fit into one or more of the following categories a non conforming home loan may be the ideal solution to assist you with your mortgage:-

• Mortgage arrears
• Less than perfect credit history
• Self employed
• Rejected by mortgage insurers
• Incomplete or no tax returns
• Short-term employed
• Irregular income
• Limited savings history
• Existing loan arrears or defaults
• Government Allowances
• Previously bankrupt
• Pensioner
• Rejected by another lender
• Foreclosure

Non conforming home loans are an exciting and necessary part of the current financial landscape and with a loan to suit most circumstances non-conforming lending may be able to help you.

© Rob Donald, Altrust Finance Group 20th November 2007

By : Rob Donald