Traditional
lenders who offer conforming loans are
extremely competitive. They must offer
desirable terms or lose their share of
the market. Meanwhile, hopeful home buyers
who were rejected often turn to mortgage
brokers and specialized mortgage lending
businesses. Alternative lending sources
not only offer a variety of loan products
but also are more willing to deal with
higher debt-to-income ratios, credit problems
and other black marks on an individual's
record.
In
cases where negative information on a
credit report may be due to disappear
in the next few years, or a borrower expects
their income to increase significantly,
non-conforming loans without excessive
prepayment penalties can be excellent.
The borrower can obtain a conventional
loan as soon as they qualify, yet enjoy
the benefits of home ownership and establish
equity in the meantime. Many home buyers
engaged in this process look at these
less desirable loans as a penalty while
others are grateful for a second chance.
Yet no one should be so anxious that they
sign for a loan with questionable terms.
"The goal of these loans is to pay
them off quickly," Riccardi said.
"What I've seen is, people don't
investigate these loans enough and when
they try to get out of it, realize what
they got into."
Resource:
"How to Shop For a Mortgage,"
a brochure available from the Mortgage
Bankers Association of America, 1919 Pennsylvania
Ave. N.W., Washington, DC 20006-3404;
call (202) 557-2700; www.mbaa.org.
