Have you been declined for a home loan, simply because you don’t fit the bank’s idea of perfect? Don’t give up hope yet!
Non conforming loans can be a great option for borrowers that do not qualify for a “prime” or “standard” home loan from a mainstream lender, but who can still afford to repay a home loan.
And don’t be put off. It doesn’t mean that there is anything dodgy about the loan. It’s just a term for loans which don’t tick all the mainstream lender’s boxes.
So what exactly are non conforming loans? And how might they be able to help in your current situation?
Why Would Anyone Need Non Conforming Loans?
There are many situations where a non conforming loan or “specialised” loan may be the best option for you to obtain finance. Essentially, they help people with bad credit history, or who have recently started a business, secure finance.
Many people use these types of loan as a stepping stone to clean up personal debts and/or credit history, then refinance to a maintstream lender.
There are many reasons why you may need to consider this type of loan. For example, you may:
- Have a bad credit history
- Be a discharged bankrupt
- Have recently started a new business
- Have outstanding ATO tax debts
- Have made many applications for credit
Don’t Give Up On Your Loan!
If you are looking for finance and have had trouble getting approved, don’t automatically assume that there are no options out there for you.
It’s important to be honest with your mortgage broker and disclose to them the reasons why your finance application was declined. Mortgage brokers know which lenders can assist with those problems and help you to identify the right solution.
What Are The Cons To Non Conforming Loans?
Banks consider these types of loans higher risk. And that risk often attracts a higher rate.
If you have a bad credit histroy, there is also a good chance the lender will charge a risk fee on your on top of the amount you are financing.
The lender may also have restrictions around how much you can borrow, and/or have limitations on requests for cash out, etc.
There are also restrictions on how much you can borrow, both in terms of the amount and also the percentage of the security property. Always check what restrictions apply before proceeding. Alternately, if you speak with a good mortgage broker, they will be able to find you the best deal suited to your goals and objectives.
Get A Credit Check Before You Apply
Before you go applying for any loan, it is always worth getting a credit check completed so you can get a clear view on what your credit history looks like. Lenders will always conduct a credit check when you apply for credit, so it is worth checking this in advance to avoid any hidden surprises.
If you do have any defaults that are unpaid, it’s worth settling these matters as soon as possible. Even though the default will stay on your credit file for some time, it may allow you to obtain a better deal on your home loan. It will also allow you to have more options in terms of the lenders that will consider your application.