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Non QM Mortgages Defined

WHAT IS  A NON QM LOAN

Non-Qualifying Loans, usually referred to as Non-QM Loans or Non QM Mortgages, can be easily defined as loans that do not meet the credit guidelines of the Consumer Financial Protection Bureau (CFPB) and the federal government, however there is a lot more to know about them: What are the terms, when should I use a Non QM loan, and what are the benefits and downsides?

NON QM HOME LOANS

The traditional mortgage and financing requirements or “credit boxes” are for the most part set by the federal government. To acquire a conventional mortgage you may need 2 years tax returns or W2. Well if your self employed you may write off much of your expenses so there may not be that much income. You would not fit into a conventional credit box. But that is when checking out a Non-QM Loan becomes an attractive option.  Without the CFPB’s backing, these loans will have a larger down payment requirement and a higher interest rate so be sure to go over the details of your loan. Non QM home loans will have their own unique guidelines and can give you many options not available with conventional bank mortgages


WHEN TO USE A NON QM LOAN

When should you choose a Non-QM Home Loan. Probably the best time to utilize a Non Qm loan is when you don’t meet the requirements of a qualified bank mortgage or a conventional loan. Not everyone is a perfect fit to the loan standards of qualified government or bank loans, and that is perfectly fine. Though utilizing a Non-QM Loan will have different terms, both some good and bad, once you close, a non qm loan will allow you to achieve your goal. The most common reasons we see an individual or family go with Non-QM Loans are:

 

Self-employment which causes difficulties with other loan options. There are often lots of hoops to jump through and restrictions that are put in place that make it difficult for individuals who are self-employed to secure a conventional or bank loan.

Having too many multi-unit rentals. For most conventional lenders, the limit for multi-unit investment properties is 10 or less. Non-QM is a great option in this case as there are a number of Non-QM Loan lenders who will finance the property as long as the incoming rent covers the mortgage, no proof of other income needed. 

Having bad credit. For a lot of standard loans, they usually require no major negative impact on your credit in the past 7 years. However, after such an event like a bankruptcy or foreclosure, a borrower only has to wait around 24-48 before they are able to apply for a Non-QM Loan. 

Dozens of other reasons: Borrowers looking for an ‘income only’ payment, foreign nationals, etc. 

 

Home Loans for Business Owners

Use Statements only to qualify.

Qualify with just 3 months, 6 months or 12 months of bank statements.

WHAT ARE THE UPSIDES OF A NON QM LOAN?

The Upsides

Compared to standard, qualified loan programs there are a list of benefits to going with Non-QM other than just in the situations listed above. Though terms for a Non-QM vary, borrowers can find lenders who do not ask for the debt-to-income ratio, have no limit on investment properties, and are open to asset depletion. Non-QM lenders are known for being flexible with documentation and their loan requirements, but don’t expect every Non-QM to have the same criteria. 

ARE THERE ANY DOWNSIDES OF A NON QM LOAN?

The Downsides

Non-QM Loans and lenders are able to have the flexibility that they do because of the terms that the lender considers the “downside”. One of the biggest things associated with Non-QM Loans is the requirement of a higher down-payment. Non-QM down-payments are usually a minimum of 20%

Non-QM Loans are also not as common. It may be difficult to find a lender who has the option for Non-QM Loans.

As with any loan, and especially with Non-QM Loans as they have such differing requirements and terms, it is important that you read through everything and be extremely thorough so you understand all risk factors and details to your specific loan. 

 

Non-QM Loans are great fits in many situations. LenderFi.co has you covered finding you a Non-QM Loan. Click now to see if you qualify. 

 

NON QM HOME LOANS

3 Month Bank Statement Loan

Qualify with just 3 months of business or personal bank statements.
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12 Month Bank Statement Loan

Qualify with just 12 months of business or personal bank statements.
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Jumbo Prime Home Loan

The most competitive Jumbo Prime Home Loan in the market today
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Foreign National Home Loan

Letter of good standing from your current financial institution or international credit report. Learn More

Asset Only Home Loan

Qualify with the most recent financial statement
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Investor Cash Flow Home Loan

Non Owner Occupied. Purchase or Refinance.
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Interest Only

Interest Only Home Loans
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