There are more choices to finance properties today than there were just a few years ago. First, a little bit of history. During the real estate boom of ten years ago, lenders offered choices that fit just about everyone — from no-income verification loans to loans with no money down and poor credit. This was known as the “subprime boom.”
In the wake of the financial crisis, these choices completely shut down and the only choices were loans for those who had money to make a larger down payment and a great credit score, especially if the loan was a large one.
These are known as jumbo loans and are above the limits that the conforming agencies, Fannie Mae and Freddie Mac, are allowed to purchase. For jumbos, 20% down was the norm and larger loan amounts required even larger down payments. Today, the “non-conforming” market is coming back, though we are not expecting a return to the sub-prime days. Known as “non-qualified mortgages,” the new non-conforming alternatives are proliferating. There are now choices that allow…
- Less than 20% down for jumbos of one million dollars or more;
- Lower credit score requirements for some programs;
- Alternatives that require no mortgage insurance on jumbo loans with less than 20% down;
- Though no-income verification loans are still a rarity, there are loans that allow the use of excess assets in the income computation equation and alternatives which allow the purchaser to carry a larger debt load;
- There are loans which allow non-approved condominium projects, foreign nationals and more.
Do not get the impression that all of this easing is focused upon larger jumbo loans. Smaller loans can be non-conforming as well when dealing with issues such as foreign nationals and non-approved condominium complexes. Credits score requirements have eased for Federal Housing Administration (FHA) and Veterans Affairs (VA) loans as well. If you or your client has a unique situation, it would pay to check with a lender to see if these new home financing alternatives fit their situation.