Question:

Are non-conforming mortgage loans a good choice?

Answer:

Whether non-conforming mortgage loans are good for borrowers depend on their personal situation. However, more often a borrower would be better off with a conventional loan, rather than a non conforming mortgage loan, for a number of reasons.

To start with, conventional loans are safer for both the lender and the borrower. The amounts that are borrowed are reasonable and therefore can be paid back. Additionally, borrowers are required to share more information, which further reduces the risk. Thus, since the chance of foreclosure is much smaller, lenders offer better interest rates than those of nonconforming mortgage loans.

And yet, there are certain cases when non-conforming mortgage loans can be the better choice for borrowers.

Who should apply for a nonconforming mortgage loan?

If you are a person who needs a huge mortgage loan amount in order to pay for a high-end luxury house, then you just have to turn to non-conforming loans. And this is not the only occasion for choosing non-conforming home loans over the conventional ones.

Here is a list of reasons why a non-conforming mortgage loan may be the better option for you:

  • If you are a borrower who for some reason finds it difficult to verify the last three years of income
  • If for some reason you don't want to disclose your financial information
  • If you have unstable income
  • If you have a history of late repayments, or have defaulted on a loan in the past
  • If the loan you want to take exceeds 90-95% of the property's value
  • If you are older and the regular long repayment term is not suitable for you
  • If you want to secure your loan against a property that normally would not be appropriate as security

A nonconforming mortgage loan may turn out to be the perfect solution for your needs, but still, think carefully about the risks involved before you take out such a loan.

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