Non-Traditional Loan Programs
Non-Traditional Loan Programs
Our knowledgeable staff will help you understand each loan program you qualify for, and help you make the best decision for you and your Family based on your situation
Conventional Loans
Conventional loans have higher minimum credit score requirements than other loan types.
Adjustable-Rate Mortgages
An adjustable-rate mortgage (ARM) is a type of mortgage loan that has a variable interest rate.
High-Balance Loans
It is a loan with a balance that exceeds the standard conforming loan limit.
Jumbo
Mortgages
It is a larger conventional loan, typically used to buy a luxury home.
Second Mortgages: Home Equity Loans And HELOCs
A type of mortgage loan that allows you to borrow against the equity you’ve built in your home over time.
Rehab
If you have found the perfect home but it needs renovation, you can purchase the home and roll the costs of the renovation into your loan.
Investment Property
If you are looking for an investment property or a vacation home to spend relaxing days, HomePrime Mortgage can help with investment property loans.
Self-Employed Home Loan
While you certainly can get a mortgage if you’re self-employed, you will likely have additional underwriting requirements to prove your income.
Debt Service Coverage Ratio (DSCR) Loan
A DSCR loan allows real estate investors to secure financing based on the rental income of a property rather than their personal income.
Conventional Loans
A conventional loan is any mortgage that’s not backed by the federal government. Conventional loans have higher minimum credit score requirements than other loan types — typically 620 — and are harder to qualify for than government-backed mortgages. Borrowers who make less than a 20% down payment are typically required to pay private mortgage insurance (PMI) on this type of mortgage loan.
The most common type of conventional mortgage is a conforming loan. It adheres to Fannie Mae and Freddie Mac guidelines and has loan limits, which often change annually to adjust for increases in home values. The 2023 conforming loan limit is $726,200 for a single-family home in most of the U.S.
Key features:
- Require a minimum 620 credit score.
- Require borrowers to provide in-depth income, employment, credit, asset and debt documentation for approval.
- Typically require PMI for a down payment of less than 20%.
Pros
- Can be used for a wide variety of purchases, from a primary home to an investment property
- You can get rid of PMI once you reach 20% equity
Cons
- Must have at least a 3% down payment
- You must pay PMI if you put down less than 20%.
- Ideal for: Borrowers with a steady income and employment history, strong credit and at least a 3% down payment.
Adjustable-Rate Mortgages
An adjustable-rate mortgage (ARM) is a type of mortgage loan that has a variable interest rate. Instead of staying fixed, it fluctuates over the repayment term. One popular ARM option is the 5/1 ARM, which is considered a hybrid mortgage because it has both a fixed-rate period and a period where the rate adjusts on a recurring basis.
With a 5/1 ARM, the interest rate is fixed for an initial period of five years and then adjusts annually for the remainder of the loan term. ARMs usually start off with lower rates than fixed-rate loans but can go as high as five percentage points above the fixed rate when they adjust for the first time.
- Additional fees on ARMs
You may also have to pay higher interest rates or an extra fee at closing if you choose a conventional ARM. The extra cost will apply to those borrowing more than 90% of their home’s value and will be 0.25% of the loan amount.
Key features:
- Include a variable rate, which can change based on market conditions
- Typically begin with a mortgage rate that is lower than fixed-rate loans
- Come with a lifetime adjustment cap, which often means the variable rate can’t jump by more than five percentage points over the life of the loan
Pros
- Monthly payments will be more affordable than a fixed-rate loan during the initial period
- Can help you pay significantly less in interest over the life of the loan
Cons
- A riskier loan option because you don’t know exactly what payment amounts you're signing up for
- If you have a plan to refinance or sell before the loan adjusts, you may be in trouble if the home’s value falls or the market takes a downturn
- Ideal for: If you have a plan to refinance or sell before the loan adjusts, you may be in trouble if the home’s value falls or the market takes a downturn
High-Balance Loans
A high-balance loan is another type of conventional loan. In a nutshell, it’s a loan with a balance that exceeds the standard conforming loan limit, but it is still considered to be conforming because it stays within the loan limit that the Federal Housing Finance Agency (FHFA) has set for localities it recognizes as high-cost areas.
The high-balance loan limit for single-family homes in 2023 is $1,089,300, which is 150% of the standard loan limit mentioned above.
Key features:
- Adhere to Fannie Mae and Freddie Mac guidelines.
- Allow borrowers to borrow above standard loan limits in high-cost counties.
Pros
- Puts conforming loans in reach for borrowers buying in especially expensive markets
- Often offers lower interest rates and down payment requirements than jumbo loans
Cons
- May have higher interest rates than a typical conventional loan
- Under Fannie Mae guidelines, every co-borrower on a loan has to have a credit score
- You won’t be able to use Fannie Mae’s 3% down-payment loan options
- Can only be used in designated locations
- Ideal for: Borrowers who want a conventional loan in an area where home prices are higher than average.
Jumbo Mortgages
A jumbo mortgage is a larger conventional loan, typically used to buy a luxury home. Jumbo loan amounts exceed all conforming loan limits and often require a large down payment of at least 20%.
Jumbo loans differ from high-balance conforming loans in that jumbo loans don’t conform to the guidelines put in place by Fannie Mae and Freddie Mac. You may also qualify to borrow more with a jumbo loan than a high-balance loan — perhaps $1 million or more — if you’re eligible.
In recent years, jumbo mortgage rates haven’t been significantly higher or lower on average when compared with conforming conventional loans.
Key features:
- Allow for larger loan amounts, even if they exceed the limits for conforming loans.
- Have stricter credit score and down payment requirements than conforming loans.
- Require a large down payment
Pros
- Can be used for a wide range of property types
- Interest rates are similar to conforming conventional loan rates
Cons
- A larger down payment is required if you want to use it for a second home or investment property
- Require high credit scores (typically 680 to 700 and above)
- Ideal for: Borrowers who need a mortgage that exceeds conforming loan limits.
Second Mortgages: Home Equity Loans And HELOCs
A second mortgage is a different type of mortgage loan that allows you to borrow against the equity you’ve built in your home over time. Similar to a first mortgage, which is the loan you use to buy a home, a second mortgage is secured by your home. However, a second mortgage takes a subordinate position to a first mortgage, which means it’s repaid after a first mortgage in a foreclosure sale.
Both home equity loans and home equity lines of credit (HELOCs) are types of second mortgages. A home equity loan is a lump-sum amount. It typically comes with a fixed interest rate and is repaid in fixed installments over a set term. A HELOC is a revolving credit line with a variable rate that works similarly to a credit card. The funds can be used, repaid and reused as long as access to the credit line is open.
- Rates could be higher on second mortgage loans
Second mortgage loans — including the home equity loans and HELOCs often used as piggyback loans — may be more expensive for some borrowers. Fees for a subordinate loan depend on the LTV of your first mortgage, but you are only charged these fees if the combined loan-to-value (CLTV) ratio of both loans is higher than the LTV for the first loan. This could be a positive for borrowers with home equity lines of credit with a balance of zero.
Key features:
- Allow borrowers to tap their home equity for any purpose, including debt consolidation or home improvement.
- Include lump-sum and credit line options.
- Use a borrower’s home as collateral, just like a first mortgage.
Pros
- Can be used to purchase or refinance a home
- Can be used by homeowners without a first mortgage in some cases
Cons
- Rates and qualification requirements are more stringent than for first mortgages
- Ideal for: Borrowers who want to use their existing equity to fund other financial goals.
Rehab
If you have found the perfect home but it needs renovation, you can purchase the home and roll the costs of the renovation into your loan.
An FHA 203(k) Loan, also called a Renovation Loan, allows buyers to finance the cost of the home and the renovation in one mortgage with a low rate.
The VA also offers a similar option for military and veterans to purchase a home and finance the required renovations to bring it up to standards set by the VA.
Rehab loans have similar qualification requirements to a standard FHA or VA loan, with additional documentation needed related to the renovation.
- Ideal for: Borrowers who want to purchase and renovate.
Investment Property
Ready to reach financial independence through real estate? Whether you are looking for an investment property or a vacation home to spend relaxing days, HomePrime Mortgage can bring the same level of personalized attention and service to all of your real estate purchases.
Your dream home might be within reach. HomePrime Mortgage can help with investment property loans.
- 30-Year Loan:
Take advantage of low rates by locking into a low payment with a traditional 30-year loan. You may be able to qualify for owner-occupied financing with lower interest rates, based on your use of the home. Talk to a loan specialist to find out what programs offer the best terms for your situation.
- 15-Year Loan
Get the same security of a 30-year fixed rate mortgage, but pay your mortgage off in half the time. This means paying less in interest and owning your home sooner! This translates to greater monthly income from your investment.
Self-Employed Home Loan
While you certainly can get a mortgage if you’re self-employed, you will likely have additional underwriting requirements to prove your income. Learn more about the application process for a self-employed home buyer, how to get a mortgage if you’re self-employed, and the pros and cons.
Key Takeaways
- Getting a mortgage if you’re self-employed will require additional documentation to verify income.
- Lenders with experience working with self-employed borrowers can help the process go more smoothly.
- Strengthening your credit, debt-to-income ratio, and down payment can help you get the best mortgage terms.
There are nearly 17 million self-employed workers in the United States, representing more than 10% of the workforce (which is about 157 million people).
Despite the rising popularity of being self-employed, mortgage lenders tend to make the application process easier for W-2 employees.
Here’s a snapshot of the process:
- Determine if you’re considered self-employed by the IRS.
- Understand the self-employed mortgage requirements.
- Compile proof of self-employed income.
- Determine how much of your self-employed income qualifies.
- Shop around for a mortgage provider.
Debt Service Coverage Ratio (DSCR) Loan
A DSCR loan allows real estate investors to secure financing based on the rental income of a property rather than their personal income. If you cannot qualify for a conventional loan, DSCR loans are a great option. Without having to submit tax returns and W-2s, you can secure capital to invest in rental properties with a DSCR loan
Qualify for a home loan without using your tax returns with a DSCR loan program.
As a real estate investor, you can avoid high rates and high points of private loans, lengthy approval processes, and strict lending criteria with a debt service coverage ratio loan, which is a type of no-income loan.
Qualify for a loan based on your property’s cash flow, not your income.
Key Takeaways
- The debt service coverage ratio (DSCR) is a number that measures a property’s current rental income compared to its debt obligations. A DSCR above 1.0 indicates positive cash flow, while a DSCR below 1.0 indicates negative cash flow.
- A DSCR loan allows a borrower to qualify for financing based on the projected rental income of a property rather than personal income.
- DSCR loans are designed for real estate investors and can only be used to purchase income-generating properties. DSCR loans can’t be used to buy a primary residence or a fixer-upper.
The debt service coverage ratio measures a property’s annual gross rental income against its annual mortgage debt, including principal, interest, taxes, insurance, and HOA (if applicable).
Lenders use DSCR to analyze how much of a loan can be supported by the income coming from the property and to determine how much income coverage there will be at a specific loan amount.