From its headquarters in New York City, Trevor Cole Commercial Corp serves diverse clients throughout the United States. Specialists in nonconforming loans, Trevor Cole Commercial Corp principals have closed more than $100 million in loans over the years.
When lenders lend money, they take a significant risk and must wait 15 to 30 years to recoup their profits. Government-sponsored entities such as Fannie Mae and Freddie Mac provide lenders with a secondary market to package loans as investments and sell them. This allows lenders to recoup their cash much faster so that they can lend to other deserving homebuyers.
Fannie Mae and Freddie Mac are allowed to purchase mortgages within a specified conforming loan limit set by the Federal Housing Administration (FHA). Currently set at $424,100, the limit is higher in some more expensive cities. In addition, conforming loans must meet certain criteria with regard to documentation and the debt-to-income ratio of the borrower.
A conforming loan is therefore a loan that is within the limits of your home area. Lenders prefer conforming loans because they are easier to sell in the secondary market.
Nonconforming loans are loans offered to borrowers who do not qualify for conforming loans. This can be because of a poor debt-to-income ratio, improper documentation, poor credit history, or simply because the amount being borrowed is higher than the area loan limit (jumbo loans). Nonconforming loans are harder to sell in the secondary market. Because of this, lenders usually charge higher interest rates for nonconforming loans and may require payment of additional fees such as insurance to offset risk.