What Is A Nontraditional Mortgage?
Author:
Sidney RichardsonJul 25, 2024
•6-minute read
If you’re unable to qualify for a conventional loan or just aren’t interested in one, you may be wondering what other types of mortgages are out there. There are tons of options to choose from, many of which fall under the umbrella term of “nontraditional” mortgages.
What is a nontraditional mortgage loan, though, and is it the right choice for you?
What Is A Nontraditional Mortgage Loan?
A nontraditional mortgage is a unique loan that doesn’t fit the requirements for a conventional or even unconventional loan. Nontraditional mortgages are usually easier to qualify for in terms of credit score and debt-to-income ratio (DTI) but can be risky for both lenders and borrowers.
These mortgages tend to have unusual repayment terms and may allow borrowers to defer their payments or pay only interest until the end of the loan. It’s important to note that Rocket Mortgage® doesn’t offer these types of loans.
Characteristics Of A Nontraditional Mortgage
Nontraditional mortgage loans are usually characterized by the following traits:
- They typically have a nonstandard amortization schedule.
- Repayment terms may be flexible.
- They’re often riskier due to abnormal payment terms and lower credit score requirements.
- The loans are often easier to qualify for than conventional loans.
- Interest rates may be higher for some borrowers.
- They may offer principal or interest deferral.
- They’re issued by private nontraditional mortgage lenders like businesses or home sellers rather than financial institutions.