Question: What is a non-conforming loan?
Answer: A Non-Conforming loan is generally a home loan in an amount greater than $203,150. This amount is the current amount set by the Government as the cut-off point for loans to be sold in the “Secondary Mortgage Market” (being Fannie-Mae or Freddie-Mac). Any loan in an amount greater than $203,150 can be seen as a Jumbo loan and thus, is non-conforming.
This is a complicated topic, so hang in there and keep learning!!
Good luck and e-mail me directly if you have any further question regarding Mortgages at munz…@ix.netcom.com. A non-conforming loan is not underwritten according to the standards normally found in the industry. Underwriting standards are the criteria used to determine if a borrower may be approved for his loan.
A conforming loan is one which meets the criteria established by the agencies which purchase loans from lenders. (Many lenders don’t wish to receive payments from you on a monthly basis. They prefer to sell the right to collect those payments to another party and receive a lump sum immediately). The standards normally applied to conforming loans are those dictated by quasi-governmental agencies such as Fannie Mae or Freddie Mac. These agencies buy huge quantities of loans from lenders, pool them, and then sell securities based upon the payments each pool of loans generates each month.
Thus, a nonconforming loan can be defined as a loan which is not saleable in the regular “secondary market” to one of the agencies because the borrower’s debts are higher than normal, the loan amount exceeds $203,150, the property is not a traditional dwelling unit, or some other standard is not met.
Hope that helps! You may also find further information at our web site.
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