non traditional home financing

First Time Home Buyer, Mortgage Company

Non-Traditional Home Financing Options

Conventional mortgages aren’t for everyone. If you’re concerned about your ability to qualify for a conventional loan or are looking for an alternative source of funding, you may be wondering what home financing options are available to you. 

Nontraditional loans are a popular alternative to conventional mortgages and come in many forms. Below, we’ve discussed some of the different types of nontraditional loans available today.


Non-Traditional Vs. Non-Conforming Loans

Before we go any further, it’s important that we clarify the difference between loans that are non-traditional and loans that are non-conforming. Though these terms are often used interchangeably, they actually mean two different things. 

Non-conforming loans are loans that do not meet Fannie Mae and Freddie Mac’s standards. These loans do not meet bank criteria for funding. This makes them “non-conventional.” The most popular types of non-conforming loans are government-backed loans such as VA and FHA loans.

Nontraditional loans are also loans that do not meet Fannie Mae and Freddie Mac’s standards. In addition to this, they also share the common characteristic of not having a traditional repayment schedule.


Common Types of Non-Conforming Loans

Non-conforming loans are often easier to qualify for than conventional mortgages because they have more relaxed requirements for credit scores and debt-to-income ratios. The two most common types of non-conforming loans are:

  • VA loans: VA loans are loans that are reserved for qualifying Veterans and members of the U.S. armed forces. These loans are insured by the federal government.
  • FHA loans:  FHA loans are insured by the US Federal Housing Administration. These loans are typically reserved for applicants with low to moderate income.


Non-Traditional Home Financing Options

If you’re not interested in or unable to qualify for the options listed above, you may want to pursue non-traditional home financing options such as:

  • Balloon loans: A balloon loan is a loan in which a generous portion of the borrowed amount is repaid in a single payment at the end of the loan period.
  • Interest-only mortgages: An interest-only mortgage is a type of home loan for which the borrower initially pays only the interest at the start. Interest-only payments are made for a specified period of time, after which the borrower begins making interest and principal payments.
  • Payment-option ARM: A payment option ARM is an adjustable rate mortgage for which the borrower is allowed to choose between several monthly payment options. 


Discuss Your Options with an Expert

If you’re not sure what home financing options are right for you, please do not hesitate to reach out. One of our experts will be happy to chat with you and walk you through the many different types of loans we offer.