What to Do if the Cost of Your Dream House Exceeds What You Can Borrow

Does your dream house sit at a much higher cost than your lender is willing to give? 

It’s frustrating when your ability to make payments is undermined by bad credit or checkered loan history. If you’ve got a chance to get the house of your dreams but the banks aren’t so sure, know that there are alternative options for you. 

We’re going to take a look at your options for getting funding for a house that’s too expensive for a traditional loan. Let’s get started. 

Why Won’t The Banks Invest In You?

It’s important to note that banks don’t always act as individual agents when they lend you money. In fact, most banks are beholden to Fannie Mae and Freddie Mac

These two enterprises are government-backed and invest in mortgages through banks. These organizations serve as a foundation for banks, mortgage prices, and the general housing market. 

Banks draw from Freddie Mac and Fannie Mae, thereby getting access to a larger pool of money to pay for mortgages. The government makes money from the banks, the banks make money from you, and you rake in home equity and build wealth. 

It’s a sort of win-win-win if you’re able to get approved. That said, those enterprises set the rules on who can borrow particular amounts of money. The Federal Housing Association creates those rules, and they apply to the enterprises that help the banks. 

So, if your credit score doesn’t fit into a good projected LTV ratio for banks and institutions, you might not get approved. 

What Can You Do?

Fortunately, there are options for you to work with. Not all lenders are backed by Freddie Mac and Fannie Mae, so not everyone needs to abide by those rules. 

There are a lot of situations where a person is a great potential lender who has bad credit. You might slip on some ice and hurt your back, getting pummelled by medical bills. Those bills tip the scales and prevent you from making a car payment for a few months. 

Your credit gets thrown off. Even though you’re back on your feet financially, there’s no way for you to get a loan because you don’t have the right credit score. 

This is the situation where you look for a non-conforming loan. Non-conforming loans are those that don’t abide by the same rules because they aren’t beholden to government enterprises. 

They allow you to get more money than you would otherwise, and the rates aren’t always higher than they would be with a government-backed loan. These loans are sometimes called “jumbo loans.”

If you’re in a situation like the one above, look for jumbo loan experts to help you find the right lender. 

Need to Pay for Your Dream House?

So, if your dream house is sitting there on the market, there are options for you to get the money. It’s important to research the lenders for non-conforming loans, though. 

We’re here to help you out with more information. Explore our site for more ideas on getting the funds for the house of your dreams.