A non-conforming loan is a loan that fails to meet bank criteria for funding.

Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it. In many cases, non-conforming loans can be funded by hard money lenders, or private institutions/money. A large portion of real-estate loans are qualified as non-conforming because either the borrower's financial status or the property type does not meet bank guidelines. Non-conforming loans can be either A-paper or subprime loans.

The flexibility of private money can allow for a much wider range of deals to be funded, although more detailed and substantive collateral and documentation may be required by a lender.

Selecting a Non-Conforming Lender

Borrowers should select non-conforming lenders in the same careful way they would shop for any other loan. Look for good rates and especially a good customer service rating. Rates for non-conforming lenders are typically higher than those for banks, but terms are more flexible and loans more easily attainable. Many companies advertising non-conforming loans are brokers who refer the loans requests they field to lenders.