A non-conforming loan is a loan that does not meet conventional financing guidelines or the guidelines of a conventional lender or bank. Loans that do not meet these requirements will need to be funded with alternative lending options. These types of loans are also called Jumbo, Alt-A or subprime loans.
Every conforming or conventional lender will have underwriting guidelines they choose to use which is also based on the loan type. Government-backed loans like FHA or VA will have a set of underwriting requirements to qualify. While conventional loans must meet the underwriting guidelines set by Fannie Mae and Freddie Mac which are the companies that buy the majority of originated loans from the bank or lender. Underwriting is the process any lender uses to determine the risk of the loan collateral, the risk of the borrower, and the likely hood that a borrower is capable of repaying the loan. The most common metrics, used in the underwriting of a loan and borrower are:
Examples of Non-conforming loans
Northwest Private Lending (NWPL) makes loans on non-conforming loans, both in the residential and commercial space. NWPL is lending private money and does not need to underwrite the borrower or collateral in the same way a conventional lender is required to. A Hard Money or Collateral based loan is a loan based on the equity inside the asset and is a great option for people who are buying non-conforming investment properties or who do not qualify for a Government or conforming loan when purchasing or refinancing an investment property. We make our own decision, so give us a call and our single point decision-maker will discuss whether your situation will work for us.