Exploring Non-QM Loans
A Non-QM loan also referred to as a non-qualified mortgage, is a type of mortgage that allows you to qualify using alternative methods of verification for income and assets, rather than using the traditional verification methods required for most loan types. A common example of an alternative verification method is using your assets as income. Non-QM loans open up real estate opportunities to a wider group of individuals because of it’s flexible qualification requirements. All lenders must follow the ability-to-repay rules which ensure that borrowers don’t end up with a mortgage they can’t afford which would put them at risk for foreclosure. Some borrowers have more difficulty verifying their income or employment because they don’t earn regular wages. A couple of examples include self-employed workers who make enough to afford the mortgage but have unpredictable income or a retiree that has no income but a lot of assets. Non-QM lenders will still review and verify your credit, income, and assets but will allow alternative documentation that qualified mortgages will not accept.
Non-QM lenders don’t have to follow the agency guidelines that they would for traditional mortgages, instead they have their own programs and their own guidelines unique to the programs they offer.
Non-QM Loan Programs
Below is a list of general Non-QM programs that are offered by most Non-QM lenders:
- Bank Statement Loan
- Jumbo Loan with 10% down
- No Income Investment Loan (DSCR)
- Asset-Based Loans
- Foreign National Loans (ITIN)
- Interest-Only Home Loans
- Recent Credit Event Loans
Who Can Benefit From a Non-QM Loan?
While Non-QM isn’t the best option for every borrower or scenario. Non-QM loans typically benefit the following:
- Self-employed individuals
- Real estate investors
- Retirees interested in purchasing a second/vacation home
- Small to Medium sized business owners
- More flexible DSCR requirements or interest-only payments
- Those who have had a recent credit event (bankruptcy, short sale, or foreclosure)
- Borrowers who fall just short of QM loan requirements
Should I Get a Non-QM loan?
Borrowers should always consult a mortgage professional when deciding whether or not to obtain a Non-QM mortgage. Non-QM can have a plethora of different programs, and guidelines can vary for each different program which can make it difficult to navigate and figure out what the best option is for you. We work with multiple Non-QM lenders who all offer a variety of different programs to be able to find a program that best fits your needs.