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Two Questions About Custom Mortgages

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Everyone has their own unique journey when it comes to home ownership, which includes the loan that you get to purchase the property. Rather than getting a conforming loan for your potential property, you may need to get a custom loan for your unique needs. Here are some questions you are likely to have about custom loan programs.

What Is The Difference Between A Custom And A Conforming Mortgage?

You'll often hear loans defined as either custom or conforming. When a loan is conforming, it means that it meets the standards set forth by the government for Fannie Mae and Freddie Mac. Since most loans are conforming loans, it means that it is easy for a lender to sell your loan to another entity so that they do not have to manage it anymore. By the nature of being a conforming loan, the other entity knows that your loan is set up with the requirements in mind so that they know exactly what they are purchasing.

A custom mortgage is when the terms of the loan fall outside what is considered the government standard. The lender will be expected to maintain the loan for its lifetime due to how difficult it is to sell it to another lender. This means that the lender may be taking on more risk, and that can result in a higher interest rate as a result. This may be worth it for you if you have very specific needs for a mortgage that can't be met with a conforming loan.

When Would Someone Want A Custom Mortgage?

You may find yourself in a unique situation where a conforming loan will not allow you to purchase a specific property. For example, if you are purchasing a multi-unit home that does not qualify for a conforming loan due to the amount of units that it has,  you may need to go with a custom loan. You may want to purchase a home that would require borrowing more money than conforming loan lending limits allow, so you will need to use a custom mortgage to get the money you need. You may also be seeking specific terms for your loan that make it a bit different, such as a lending period that extends beyond 30 years to make payments more affordable. 

While it can be challenging to find a lender that will take on a custom mortgage, it is possible to get the mortgage product that is exactly what you want.