Qualifying for a real estate mortgage can be complicated, especially if it’s hard to prove your income or you have had issues with your credit score. A non-qualified mortgage does not have the exact loan requirements as a conventional loan, making it possible for people with unconventional finances to get the loan they need. If you invest in real estate, are self-employed, have a lot of debt, or have an issue with your credit score, a non-QM mortgage can help open the door to owning a home.Â
However, these loans also tend to come with some difficulties. Finding these loans can take some extra work and may cost you more in fees and interest. If you still have issues getting a mortgage because of their credit or income requirements, we suggest you check out non-qualified mortgage as an alternative.
How Are Non-QM Loans Different That Qualified Mortgages
The primary difference between non-QU and qualified mortgages is how they closely follow consumer protections placed by the Dodd-Frank Act and the CFPB (consumer financial protection bureau). These protections help regulate interest fees and rates on home loans. They also require real estate lenders to verify that the borrower can repay their loan and discourage lenders and borrowers from overborrowing.
Qualified Mortgage
A qualified mortgage will follow these guidelines:
- No interest-only loans, negative amortization, or balloon payments
- Verification and consideration of your debts and income
- Limited fees, upfront points, and annual percentage rate (APR)
- Loan terms no longer than thirty years
Non-QM Mortgages
Non-Qualified Mortgages enable you to bypass one or a combination of the abovementioned guidelines. Here are some examples of the features and terms that you may find when applying for a non-qualified mortgage:
- Less Documentation Required: You can use state income or bank statements instead of submitting your pay stubs or tax returns to verify your total income.
- Forty-Year Loan Term: Spreading out your payments over a 40-year term can help lower your monthly payments. However, it will also raise your overall interest over the life of your loan.
- A High DTI Ratio Is Allowed: You could still qualify for non-qualified mortgages if your monthly DTI ratio exceeds 43% of your total annual income.
- Recent Credit Event: These loans are built to work for individuals locked out of a traditional mortgage due to recent foreclosure or bankruptcy.
How Can You Get A Better Rate On Your Non-QM Loan?
Getting a reasonable rate on non-qualified mortgages can be complicated since these loans are often considered riskier than traditional mortgages. It’s the primary reason they come with higher interest rates and fees. Nevertheless, our team from Real Estate Funding Solutions has a few tips that can help you get better rates on your non-QM loan:
Try Improving Your Credit Score
Your credit score is one of the most significant factors in getting a reasonable rate on any loan. A high credit score should help you qualify for a better interest rate on non-qualified loans. You can quickly improve your credit score by reducing your credit card balances, paying bills on time, and disputing errors on your credit report.
Look Around
It is always best to shop around and get a good idea of rates by comparing offers from several lenders. Fees and rates can vary significantly from one lender to the next, so you need to shop around and compare different offers before you finalize one.
A Bigger Down Payment
A larger down payment should help you quickly qualify for a non-QM loan and get a lower interest rate. Most real estate lenders look at borrowers with significant down payments as less risky and could be willing to give a lower rate.
Go For A Shorter Loan Term.
Going for a shorter loan term will also help you reduce your total interest rate since most lenders consider short-term loans less risky. Nevertheless, you must never forget that a shorter loan term will also come with higher monthly payments, so ensure you can afford it before signing the papers.
Work With An Experienced Mortgage Broker.
A professional mortgage broker from Real Estate Funding Solutions can help you find lenders who offer the best non-QM loan terms. We can also help you negotiate with your lender and get better terms and rates on your loan.
It’s vital to remember that non-QM loans tend to be more expensive than a traditional mortgage. So if you are a borrower, you should carefully consider your loan terms before you make a final decision.
Contact Real Estate Funding Solutions For More Information Today!
Our Real Estate Funding Solutions experts can help you find the best terms for your non-QM loan. We have years of training and experience in the field, which has helped us develop deep working relationships with several non-QM loan lenders. With our professional expertise and guidance, you can easily find a loan term that fits your wants and needs the best. Call our team at 855-913-8637 if you want more information.