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Non Conforming Loan

Non Conforming Loan

A loan that does not meet the Fannie Mae or Freddie Mac underwriting guidelines. This is also known as a portfolio mortgage. The loan can't be sold on the secondary market so it must keep it and service it in its own portfolio.

Non-conforming loans have no set guidelines, every lender has its own guidelines. Non conforming lending is profitable for lenders because they charge higher-than-normal interest.

There are two major cases when you need non-conforming loan: first - Jumbo loan, the mortgage that exceeds a certain dollar amount; second - Non-Conforming loans for poor credit borrowers, are also known as sub-prime loans. The sub-prime loan business has grown enormously over the past years, particularly in the refinance business and with investment real estate loans.

While most non-conforming lenders are simply find a way to secure their money, some of them are predatory. It is considered predatory when lender do not truly expect the loan to be paid off. Predatory lender will wait until emergency, job loss, medical or any other "unexpected" expense to disrupt your ability to handle loan payment and may start foreclosure even if you get a couple weeks behind.

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