The Non-Conforming Home Loan

With all the negative circumstances that can surround a home loan, fortunately there are still countless lenders that will offer a conforming loan due to its safety. With a conforming loan, the Fannie Mae and Freddie Mac corporations provide some reliable insurance for the lender. On the other hand, because of the complexity and the risks involved, many loan officers will not offer non-conforming loans.

By definition, a non-conforming loan is one that does not meet the criteria established by the bank. One example is a loan (sometimes referred to as a jumbo loan) which exceeds the conforming loan limit set yearly by Fannie Mae and Freddie Mac. Presently, this limit has been set at $417,000. In addition, non-conforming loans are often issued to those with seasonal contracts, poor credit, and those without the collateral needed. Some borrowers even pursue non-conforming loans to cover the entire cost of the home.

Because lenders are more reluctant to issue a non-conforming loan, the interest rates are often much greater. The borrowers credit is what is used to determine both the interest rate and the LTV, or the ratio of the loan amount to the value of the home. This LTV provides the lender with protection in that the property can be taken and resold if needed.

When selecting a non-conforming lender, a borrower must be extremely careful. He or she is vulnerable, and needs to pay close attention to the rates and terms set by the lender. It is important to understand the market and compare options. The website http://www.1refinanceloan.com is one known to provide a great deal of valuable information. The experts at http://www.1refinanceloan.com have been helping borrowers online since 1997.

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Not Everyone Gets The Same Loan At The Same Rate- Headline Rates Explained

If you are thinking of applying for a loan, you should be aware that there are many different loan products available and that not all people will be offered a loan at the rate it is advertised. There are two major types of loan: secured and unsecured. The former is only granted on the basis that something valuable is offered by the borrower as security for the loan, usually property. An unsecured loan, on the other hand, is given without the need for the borrower to agree to any security.

In the current climate of fierce competition and aggressive lending by the financial sector, secured and unsecured loans tend to be very competitive in terms of interest rates - both from high street and specialist lenders. When advertising a loan, a financial institution will have a published headline rate (APR). According to an OFT ruling, this rate must be offered to at least 66% of successful loan applicants. What this means in a competitive market is that potential borrowers who have the best credit profiles will go for the most attractive headline rates, and will usually get them. However, applicants who do not score as highly as the top 66% may be offered the same loan product at a higher interest rate rather than be declined outright by the lender. The justification for the lender to charge a higher interest rate is the level of risk involved.

Each prospective borrower is individually assessed in order to determine a level of risk; the lender can therefore determine whether to lend to an applicant and also what rate of interest to charge. As well as a risk assessment, the lender will also factor other things into the equation, such as any security and the purpose of the loan.

For example, if you already have a large amount of debt and are seeking a debt consolidation loan, prospective lenders will assess your personal credit score, how much you can afford to pay each month, your past credit history and whether you own your home. If you suffer from a bad credit history, loans can be difficult to get from high street banking institutions, even if you are homeowner. But there are many specialist lenders who will offer bad credit loans for debt consolidation and many other purposes based on a different set of criteria to the ones applied by high street lenders. However, these loans can have different interest rates to those available on the high street.

Many critics claim that the people who can afford it least end up paying the most when it comes to borrowing. Financial companies counter that argument by saying that they are less likely to encounter difficult repayments from those who are a good credit risk, and therefore the differential is justified.

But, if you are thinking of applying for a loan, get a loan quote first. There can be a huge price differential between financial institutions so you shouldnt just accept the first offer!

Adam Singleton is an online, freelance journalist and keen amateur photographer from Scotland. His interests include traveling and hiking.

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