Best Nonconforming Loans in California

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Contributor, Benzinga
August 8, 2023

A nonconforming loan can be a great option for buyers who may not qualify for a conventional loan. Offering lower down payments and lower credit requirements are just a couple of perks to nonconforming loans. Choosing the best lender for your nonconforming loan in California is key, as each lender can set its own standards and may only offer certain nonconforming loans. Take a look at some lender options.

Best Nonconforming Loans in California

A nonconforming loan is a loan that does not meet the requirements of the typical Federal Housing Finance Agency (FHFA) standards. Instead, the following lenders offer a myriad of nonconforming loans in California, which have their own sets of requirements and standards. 

Depending on the type of home you are looking for or if you are looking to refinance, one of these lenders may be able to help. Whether you are considering an FHA loan, VA loan or jumbo loan, these are the top options to help you have a successful experience with your nonconforming mortgage. 

Angel Oak Mortgage Solutions

Angel Oak Mortgage Solutions is a go-to lender that specializes in jumbo loans. This type of loan is applicable if you are looking to purchase an expensive property and need a loan that is larger than what would be considered a conforming loan. 

In its jumbo loan program, Angel Oak offers three options — the Prime Jumbo, Gold Prime Jumbo and non-Qm Platinum Jumbo. All are available for purchase, cash out and rate-term refinance, with different variables.

Prime Jumbo 

  • Up to $3 million loans
  • Single-family homes, townhomes and warrantable condos are included
  • Can be used on investment properties in addition to primary and second homes
  • A seven-year seasoning on bankruptcies and foreclosures

Gold Prime Jumbo

  • Up to $3.5 million loans
  • As little as a 10% down payment is possible
  • Up to 50% debt-to-income (DTI) ratio
  • Can be used on the same types of homes and properties as the Prime Jumbo loan
  • A seven-year seasoning on bankruptcies and foreclosures

Non-QM Platinum Jumbo

  • Up to $3 million loans
  • Can be used on the same types of homes and properties as the Prime Jumbo loan as well as nonwarrantable condos
  • One-year tax return program
  • Four years out of bankruptcy or foreclosure

CrossCountry Mortgage

CrossCountry Mortgage offers several nonconforming loans with little to no money down. It prides itself on thinking outside the box and finding more options to finance when others cannot. Some of its options include FHA, USDA and jumbo loans. 

  • Its FHA loans require just 3.5% down and a minimum credit score of 580. Available on one- to four-unit properties and condos.
  • Its USDA loan doesn’t require a down payment with a minimum credit score of 640. Available on one- to four-unit properties, condos and planned unit developments (PUDs).
  • Its jumbo loan offers up to $3.5 million loans with credit scores as low as 700. All property types, including nonwarrantable condos, may be considered. 

New American Funding

New American Funding also offers a variety of nonconforming mortgage options. In addition to FHA, USDA and jumbo loans, it also provides unique benefits to buyers with access to VA loans.

  • Its VA loan offers no down payment and lower interest rates.
  • VA loans never have monthly mortgage insurance.
  • Up to 100% cash-out refinance.
  • It offers assistance to VA customers experiencing certain hardships.

In addition, New American Funding provides several different types of VA loans. 

  1. VA Streamline Refinance Loan
  2. VA Purchase Loan
  3. VA Cash-Out Refinance
  4. VA Energy Efficient Mortgage
  5. VA Native American Direct Loan

Choosing a loan that works in your best interest is important. If you are eligible for a VA loan, a lender like New American Funding has many options that can help find the best fit for you. 

North American Savings Bank

North American Savings Bank offers a variety of nonconforming loans. Some of its guidelines include:

  • At least one year of self-employment in the same line of business
  • Job change from form W-2 to 1099
  • Show income with pay stubs from a second job 
  • $200,000 minimum loan requirement
  • Conforming pricing up to $600,000 loan
  • Offers jumbo loans for loans exceeding the conforming loan limit — minimum loan amount is $200,000 and the maximum is $1.25 million with as little as 10% down and mortgage insurance 
  • FHA loans require steady employment history and may only be used on a primary residence with 3.5% down and total monthly debts of less than 43% of gross monthly income
  • VA loans require at least two years of steady employment and at least two years past any foreclosures, with perfect credit since 

What is a Nonconforming Loan?

A nonconforming loan is a loan that does not meet the requirements for a loan backed by Fannie Mae or Freddie Mac. Lenders typically sell the loan to government-sponsored enterprises such as Fannie Mae or Freddie Mac, but if a loan does not meet their specific guidelines, they cannot purchase the loan. 

A nonconforming loan can be used by individuals needing slightly lower thresholds for down payments, credit scores and sometimes larger loan amounts. These are usually government loans or jumbo loans. 

  • FHA loans
  • VA loans
  • USDA loans
  • Jumbo loans

Benefits of a Nonconforming Loan

Realizing that you, as a borrower, do not qualify for a conventional loan can be scary at first. But there are many benefits to holding a nonconforming loan. These benefits can help you purchase the home you love without having to wait. 

Lower credit score: Some nonconforming loan options like the FHA loan have minimum credit scores as low as 580. 

Lower down payment: Many of these options also offer as low as 3.5% down or even no down payment. 

Different types of properties allowed: Purchasing properties such as single-family homes, condos or townhomes, rural homes, investment properties, second homes or one- to four-unit properties are allowed under certain nonconforming loan types. 

The leniency of credit history: Having a negative event like a bankruptcy, foreclosure or short sale on your credit history can still result in approval. 

How to Prepare for a Nonconforming Loan

As soon as you have the idea that you’d like to purchase a property or refinance, start preparing for your loan to help make the process smoother and ultimately successful. 

Try to improve your credit: It never hurts to improve your credit. Improvements can mean you become eligible for a better product or a better interest rate. 

Pay off debt: If you can, pay off debt so that your DTI is more appealing to lenders. 

Stay at the same job: A steady employment history that can be proven will help show that you  can work and keep up with mortgage payments. 

Collect documents: Begin gathering documents that will be needed so you are ready when the lender asks for them. This can include pay stubs, your Social Security card, tax information and bankruptcy documents. 

Frequently Asked Questions

Q

Do nonconforming loans have higher interest rates?

A

Nonconforming loans usually have higher interest rates than conforming loans. Lenders tend to do this because a nonconforming loan is seen as a risky investment. It is still worth shopping around to find the best interest rate from the best lender. 

Q

What is a high-balance loan?

A

A high-balance loan is a loan that exceeds the national loan limits but does not exceed the local loan limits. This type of loan has limits set by the FHFA and varies by county. Unlike a jumbo loan, high-balance loans are backed by Fannie Mae and Freddie Mac and may be a good option for high-income areas. 

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