Sunday, November 3, 2013

Are Non Conforming Mortgage Loans Prime or Subprime Home Financing?

In today's credit driven society, the dream of homeownership has become a reality for many consumers throughout the 50 states. For the most part, homeownership has been positive for individuals and families experiencing the sense of pride from owning a home and making a mortgage payment monthly.However, for some applicants becoming a homeowner has only been made possible by obtaining financing using an alternative form of financing otherwise known as subprime loans. An non-conforming loan program is definitely a good choice for some homeowners and can be wrong for others. Negative Amortization loans, jumbo home mortgages with interest only payments would both be considered examples of non conforming loans. They don't follow the Freddie Mac or Fannie Mae guidelines that lenders consider when offering conventional loans.These new loan options have in some cases led to borrowers taking on loan amounts that are too large for them based on their income. While these consumers qualify for the loan on paper, it can extend their monthly financial situation to the point where they are spending close to 50% of their monthly income on housing, instead of the suggested standard of 30%. For some consumers, these non-traditional loan programs are a viable option. Some borrowers would rather go with a standard 30-year fixed rate or a hybrid ARM with a longer fixed period would be the best option for them.The Federal Reserve and Fannie Mae, both recommend that consumers meet with an experienced mortgage professional to determine which loan program meets the needs for their specific circumstances.