It is now possible to get a non-QM mortgage loan, which means you no longer have to fit into traditional mortgage lenders’ rigid qualification guidelines. This opens up the possibility of getting a home loan even if you have less-than-perfect credit or have had some financial difficulties. But it’s important to understand how to get a non-QM mortgage loan.
- Interest rates
Typically, the interest rates on non-QM mortgage loans are higher than conventional ones, but they are still competitive. The rates can vary from one lender to another, and you can expect to pay anywhere from two to four percent more than your conventional mortgage.
These are loans designed to help borrowers with credit problems, inconsistent income, or high debt-to-income ratios. They can be used to purchase primary, secondary residences or investment properties. They also have longer loan terms than conventional mortgages and may offer interest-only payments.
These loans are often used by self-employed borrowers and those in the gig economy. However, they can also be used by consumers with a poor credit history. In order to qualify for non-QM mortgage loans, borrowers must prove they can repay the loan. Some income verification options include using bank statements to prove earnings, qualifying off just the rent on an investment property, asset depletion, or 1099s.
- Income verification
Several mortgage lenders offer non-QM mortgage loans. These loans are often a good choice for real estate investors who may not qualify for a QM loan. However, they carry risks and should only be used if the borrower can afford payments. Lenders also must verify the borrower’s assets which can be done by providing bank statements, retirement and/or brokerage accounts along with several other methods.
The Great Recession and a housing crisis hit the economy in 2007 which led to many borrowers being forced into foreclosure. In response, government regulation tightened lending practices. The regulations were designed to ensure that borrowers could not enter loan agreements that they could not afford.
Mortgage lenders must also review the documentation of a borrower’s income. The borrower may need to provide recent paychecks, 12 months of bank statements, W2s, 1099s, a P&L and/or other items. and a letter from their employer. These are especially important for recent job changes.
- Requirements
Those who need a mortgage but don’t meet all the requirements for a QM mortgage may find that a Non-QM loan is a better fit. These mortgages do have higher rates and fees, but they also offer alternative documentation options. A Non-QM loan may be a good choice for self-employed people who can’t meet the requirements for a QM loan. They can also be a good fit for contract workers. Business owners often don’t know the exact amount they will earn each year. However, a Non-QM loan can allow them to purchase a home without relying on pay stubs.
Non-QM loans can also be a good fit for individuals with a limited or damaged credit history. Some lenders will require a minimum credit score. However, some will make common sense exceptions on a loan-by-loan basis. Non-QM loans also have less regulation than other types of loans. This is a benefit for borrowers who are looking to refinance their homes or purchase a new home.
- Foreign nationals
Whether you are a foreign national or non-citizen looking to buy a new home there are many options. However, you should understand that there are difference requirements between the types of loans.
A non-QM mortgage loan is designed for foreign nationals who do not qualify for conventional loans. The lender looks at your assets, income, and property location. These products can be a better option than traditional mortgage options.
If you are a foreign national looking to buy your first home in the United States, you may qualify for a non-QM mortgage loan. However, you will need to meet certain guidelines. Non-QM products are more flexible than traditional mortgage options, and they are designed to be borrower-friendly. Unlike conventional loans, a non-QM mortgage is based on an individual case scenario, so the lender may not require a U.S. credit score. Instead, they may look at your liquid assets and income from investment properties.
Last Words
So, if you’re looking for a mortgage loan that doesn’t require perfect credit and are more flexible with income documentation a non-QM mortgage may be the right choice. Non-QM mortgage loans are available from various lenders, so it’s important to compare interest rates and terms to find the best deal.