Non-Conforming Loan Programs

An Adjustable Rate Mortgage (ARM) is a type of home loan where the interest rate adjusts periodically based on a specific index, causing monthly payments to change over time. Initially, ARMs offer lower interest rates compared to fixed-rate mortgages, but these rates can increase or decrease at predetermined intervals.

Key Features:

• Initial Fixed-Rate Period: ARMs typically start with a fixed interest rate for a set period (e.g., 5, 7, or 10 years), providing lower initial payments.
• Adjustment Period: After the fixed-rate period, the interest rate adjusts periodically based on market conditions and a specified index.
• Rate Caps: ARMs usually have caps that limit how much the interest rate and monthly payments can increase at each adjustment and over the life of the loan.

ARMs can be conforming loans, meaning they meet the standards set by Fannie Mae and Freddie Mac, including loan size limits. Conforming ARMs offer more favorable terms and are easier to qualify for.

ARMs can also be non-conforming loans, which exceed the conforming loan limits or do not meet other standards set by Fannie Mae and Freddie Mac. These are often referred to as jumbo loans and may come with higher interest rates and stricter qualification requirements.

Who Benefits Most:

• Home Buyers Planning to Move or Refinance: Individuals who expect to move or refinance before the initial fixed-rate period ends can take advantage of the lower initial rates.
• Borrowers Expecting Income Growth: Those anticipating higher future earnings may benefit from the initially lower payments of an ARM.
• Risk-Tolerant Borrowers: Individuals comfortable with potential payment fluctuations due to interest rate changes may find ARMs advantageous.

Some program features and investors are Delegated. This means that the loan can be underwritten in-house by a Churchill Mortgage Underwriter.

These delegated programs can also be non-conforming, also known as JUMBO loans, which exceed or do not meet the standards set by Freddie Mac and Fannie Mae.

Non-Conforming Delegated Loan Programs

• Bank Statement Program
• 40-Year Interest-Only Program
  
• Non-Warrantable Condo Program

These program features and investors are Non-Delegated. This means that the loan must be underwritten by an investor Underwriter.

These delegated programs can also be non-conforming, also known as JUMBO loans, which exceed or do not meet the standards set by Freddie Mac and Fannie Mae.

Non-Conforming Non-Delegated Loan Programs

• Medical Doctor Loan Program
• RuraLiving & Hobby Farm Program
• HomeRun Program

A jumbo home loan is a mortgage that exceeds the loan limits set by the Federal Housing Finance Agency (FHFA) for conforming loans, which are purchased by government-sponsored enterprises like Fannie Mae and Freddie Mac. These limits vary by region but are typically around $726,200 for most areas in 2024. Because jumbo loans are not eligible for purchase by these entities, they are considered riskier and usually come with higher interest rates and stricter credit requirements compared to conforming loans.

Qualifying for a jumbo loan typically requires a higher credit score. Lenders also expect a larger down payment, usually around 20% or more, though some programs may allow for lower down payments with strong financial profiles.

Additionally, borrowers need to demonstrate a low debt-to-income (DTI) ratio, usually below 43%, and provide proof of significant liquid assets to cover mortgage payments for several months, reflecting the higher risk associated with larger loan amounts.

Yes, interest rates for jumbo loans are generally higher than those for conforming loans. This is because jumbo loans are not backed by government-sponsored entities and thus carry more risk for lenders. The higher interest rates compensate for this increased risk. However, the exact rate depends on various factors, including the borrower’s credit profile, down payment size, loan amount, and current market conditions.