Non-Conforming Loan

A non-conforming loan is a mortgage that fails to meet the criteria for a conforming loan set by Fannie Mae and Freddie Mac.  Reasons include the loan amount being higher than the conforming limit, which is $726,200 in most U.S counties, or the lack of sufficient credit or the unorthodox use of funds or collateral.  As a result, you may still be able to buy a home with a non-conforming loan if you have a negative mark on your credit report, such as a bankruptcy. Keep in mind that these loans also often have higher interest rates. 

 Non-conforming loans are not eligible for insurance through government programs and are part of the private lenders' investment portfolios.  They are generally riskier for investors and follow different underwriting guidelines.   They may allow borrowers to purchase more expensive properties. 

Benefits of taking out a non-conforming loan include: