Expanded Criteria Lender Guidelines
for Non-Conforming/non-Traditional Home Mortgage Lending

Non-Conforming mortgage lenders provide loans to borrowers and for properties that do not meet traditional, conforming, and conventional loan requirements per lender guidelines (as based on HUD home loan regulations).

Almost any conforming loan type can be substituted with a non-conforming, non-traditional, non-conventional mortgage loan  (Whether the loan is for a First lien positioned loan, or Second mortgage loan) if any of the following items fall outside the lender conforming criteria guidelines.

• Loan amount
• Imperfect Credit
• Income Ratio
• Property
• Employment
• Residence

There is little difference in the loan programs provided by traditional and non-traditional lenders.  There are standard 30 and 15 year fixed mortgages, 10, 20, 25, and sometimes 40 year mortgage terms, balloon mortgages, combo loans, 1st & 2nd mortgages, HELOC (Home Equity Lines of Credit), Adjustable Rate Mortgages (ARM's), etc...  

The main differences between conforming and non-conforming mortgages is that Non-traditional lenders assess higher rates and fees when there is a lower credit grade, a lack of income documentation or a high loan-to-value ratio.

Loan Amount
Non-traditional lenders adjust loan ratios as a method to reduce the risk of financial loss if a borrower defaults and a foreclosure results. (Also see JUMBO loans below)

Loan to value (LTV) - Loan amount divided by property value).  Most lenders believe borrowers with a low loan-to-value ratio (70% or greater equity) have a lower probability of a foreclosure than a borrower with a high loan-to-value ratio (!0% equity or less).

In cases where a borrower has a low credit grade/score and/or lack of income documentation; lenders may reduce the loan amount and assess higher fees/closing costs (such as discount fees).

NOTE:  Not to be confused with specialty loans such as for new home purchases where the borrower can finance a home for up-to 110% of value.  Also Note:  Second mortgages and combo loans can be as high as 125% LTV for borrowers that exceed conforming loan criteria.

A non-conforming loan Amount also results from  mortgages exceeding Fannie Mae or Freddie Mac loan limits called a Jumbo home mortgages.  A Jumbo Loan is a loan that does not conform to the loan limit guidelines established by Fannie Mae or Freddie Mac.

Previous Years:

Loans that exceed the conventional loan limit per each of the above property types is called a Jumbo mortgage loan.  These loan amounts can go up to ten million dollars ($10,000,000).  Loan to value limits for Jumbo mortgage loans range from 50% to 100% depending on the loan amount and usually carry a higher interest rate.

Imperfect Borrower Credit Lending
Borrowers with less than perfect credit criteria ("B/C and D" Credit Ratings) receive loans based on  non-conforming guidelines.

Mortgage lenders primarily review the borrowers last two year overall consumer credit history to determine ability to repay a new mortgage loan.  The mortgage payment history being primarily critical is scrutinized for late mortgage payments or rent payments, bankruptcies, defaults, foreclosures, collections, number of credit obligations and the amounts there-of, etc...  

Any one or combination of these non-conformances can result in higher rates and fees as well as limiting loan amounts and additional restricted guidelines.

Please See Credit for all the details about your credit and mortgage financing

Income Ratios

Besides credit considerations, non-traditional lenders review the capacity of the borrowers to repay the mortgage obligation.  Non-traditional lenders adjust loan ratios as a method to reduce the risk of financial loss if a borrower defaults and a foreclosure results.  Debt ratio (DR - total monthly debts divided by the borrowers total monthly income).  The higher the debt ratio, the higher the risk.

A second home that is not the borrowers primary residence (i.e.. vacation home).

Non-Owner Occupied Investor Programs.  Investment properties are generally defined as a property being rented. Second (vacation) homes are not considered investment properties. An investment property cannot consist of more than four rental units. These mortgages require complete documentation about the borrower and the property.

Typical down-payment requirements are as much as 20% of the purchase price.  Interest rates can be fixed for as long as 15 to 30 years. The rates are generally about 3/8 percent higher than normal owner occupied rates. Please contact us if you are interested in this type of loan.

Other property types such as land purchases, investment property, or other non owner-occupied homes.

Expanded Criteria
Non-Conforming Income Documentation

Nonconforming loans can also refer to self-employed borrowers for i.e. that are paid in cash which results in alternate loan documentation, such as Borrowers with disruptions in employment history.  Non-traditional lenders will typically use one of these types of loan applications concerning borrower income: Full documentation (Full Doc's), easy doc/simple doc, Stated Income/Stated Assets (SISA), No Ratio (debt raatio not considered with good credit score/grade), and No Income/No Assets (NINA).

Full Documentation:  Borrowers provide pay stubs, W-2s or federal tax returns for self-employed.  Lenders generally require a two-year employment history to substantiate the borrower's income.

Easy Doc/Simple Doc:  Borrowers provide bank statements to substantiate monthly income and the last two pay-stubs.

Stated income/Stated Assets: Lenders use the income from the loan application at face value with no documentation to support it, but employment history is verified.  Also, the borrowers do not have to provide any documentation to substantiate assets listed on the loan app. (the greater the total asset value,; the easier it is to qualify for the loan). 

No Income/No Assets loans are similar to SISA loans and differ in that they require no statement of income or employment on the loan application.  Neither of which are considered or necessary to qualify for the loan.

SISA and NINA loans do require an excellent credit rating.

Some industry experts believe as this Non-Conforming / non-Traditional/non-Conventional Mortgage Lending Market expands, competition in the non-traditional mortgage market will produce better rates, loan programs and terms

See our Hard Money Page for other non-conforming financing
and Credit affects on Loan programs, and Conventional Loans