Non-conforming mortgages do not meet FHFA mortgage amount limits and/of underwriting guidelines set up by Fannie Mae and Freddie Mac.
They usually require more paperwork and a higher interest rate because they are riskier.
A note in real estate is a promissory that you will repay a loan. It works with a mortgage which enforces the contract.
When you carry a note you finance the sale of your house. You loan money to the buyer to pay for your house, and they make monthly payments to you instead of a bank.
The underwriting process protects banks from making bad loans.
They want to know the borrowers credit history and debt load. They also want to know if the house’s market value matches the sale price.
Underwriting evaluates the risk of a transaction. Banks do this by reviewing the borrower’s credit history and verifying the property’s value.
It is important because it minimizes losses for the bank.
Underwriters look for a borrower’s credit history, their capacity to borrow money, and the property’s value.
Buyers often get confused with the relationship between income and credit when buying a house. Banks will look at the total income and the lower credit score when approving a mortgage.
If one spouse has a very low credit score you will get a lower interest rate if you don’t include him/her on the loan. However, you also won’t be able to use his/her income, so you won’t be able to afford a more expensive house.