About Non-QM Home Loans
Non-QM- For those not familiar with the term, Non-QM, it simply stands for ‘non-qualified’ mortgage. That’s somewhat of a misleading term, leading many to believe that a non-qualified mortgage is for those who cannot qualify for a home loan. On the contrary, a Non-QM loan is extremely competitive with a wide array of loan options yet with a different type of approval methods.
To understand what a Non-QM loan is, you need to know what about a ‘Qualified Mortgage.’ A few years ago, the Federal Housing Finance Agency came up with a program which defined what a Qualified Mortgage means. A Qualified Mortgage means a loan with certain verifiable characteristics. A Qualified Mortgage is one where:
We’re here to make your Non-QM loan process easier, with tools and knowledge that will help guide you along the way, starting with our Non-QM Loan Qualifier.
We’ll help you clearly see differences between loan programs, allowing you to choose the right one for you whether you’re a first-time home buyer or a repeat buyer.
The Non-QM Loan Process
Here’s how our home loan process works:
- Bank Statement Programs
- Debt Service Coverage Ratio Loans
- Self-Employed Complex Financial Statements
- Super Jumbo Loans to 4 Million
- Interest-Only Options
- Requirements Outside Agency Guidelines
With a QM loan, lenders are shielded from potential lawsuits from borrowers.
However, a non-QM loan does not equate to a ‘sub-prime’ mortgage, one that is designed from a borrower with damaged credit. Instead, a non-QM loan might verify qualifying income using bank statements instead of paycheck stubs, tax returns and W2s.
This gives lenders more underwriting flexibility compared to a Qualified Mortgage. What sort of flexibility? For most non-QM loans, income calculations and debt ratios are essentially ignored. Some of these loans do not require a minimum two-year job history. Cash reserve requirements are relaxed or in some cases eliminated entirely. Using rental income from a borrower’s rental property may be used to boost income.
Types of Non-QM Loans- A popular type of non-QM loan is a ‘Bank Statement Loan.’ This program reviews bank statements and identifies deposits made into the accounts and counting those deposits as income. Many of these programs only need one month of bank statements, not two or three.
Another type of non-QM loan is referred to as an ‘Asset-Based’ loan. This type of loan uses a borrower’s assets to help qualify. Such assets may be in an existing checking or savings account, stock and mutual fund accounts and even a money-market account.
Jumbo loans, those exceeding the current conforming loan limits, with just 5% down are available. This is compared to a conventional jumbo loan where the minimum down payment is 20%. With a non-QM loans, under this scenario borrowers save another 15% of the sales price. With a $600,000 loan amount, that equates to a savings of $90,000.