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| Each letter will take you to a list of financial terms and their meaning. |
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Non-Conforming Loan
Conventional home mortgages not suitable for sale and delivery to either FNMA or FHLMC due to a variety of reasons, including loan characteristics, loan amount or underwriting guidelines |
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Non-Conforming
Type of mortgage loan which does not conform to regulatory limits such as loan-to-value ratio, term and other characteristics.
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No Income Documentation Loans
These types of loans are usually grouped together in spite of their slight differences, "light documentation", "no-income verification" and "quick qualifier", or "QQ" loans are the answer for many buyers who have income from hard to verify sources. These loans are frequently used by self-employed borrowers who find it hard to verify all of their income, or by borrowers with very complex income structures. For instance, a borrower who has income mainly from investments and rental properties may be unwilling to verify all sources of income due to the volumes of paperwork this would require. With a no income documentation loan, the borrower can just state his income on the application, and the lender will utilize this stated income to qualify the loan. Lenders do this because they recognize that by charging a slightly higher rate of interest they can rely on this stated income of the borrower and cover the additional risk. Lenders do in fact rely on verifying that the borrower has assets that reasonably match the stated income, together with excellent credit.
With a typically 25% or higher cash down payment, along with good credit, these loans let borrowers buy into purchase prices a lender wouldn't normally qualify them for. Because no-income documentation loans carry a higher interest rate, they should only be used when needed, not just to avoid the paperwork requirements of a full documentation loan. |
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Net Effective Income
This stands for the gross income less the federal income tax.
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Negative Amortization
This takes place when the monthly payments are not large enough to pay all the interest due on the loan. Unpaid interest is added to the unpaid balance of the loan. The risk of negative amortization is that the home buyer ends up owing more than the original amount of the loan. |
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