If you have had a difficult credit bump in the past, you will have a tough time getting approved for a qualified mortgage. However, non-qualified mortgage loans, on the other hand, are pretty different. These do not work on federal standards or have stringent guidelines. There are relaxed requirements to establish your ability to repay the loan.
Not every borrower can relate to the traditional mortgage matrix. Therefore, non-qualified mortgage loans are structured explicitly for nontraditional borrowers to achieve their American dream. Although some may not meet the federal loan eligibility guidelines, lenders such as the Real Estate Funding Solutions team offer creative financial products to ensure your loan approval based on your homeownership or investment goals. If you find yourself relating to these circumstances, here are some must-know details about a non-qualified mortgage.
Defining Non-QM Loans: A non-qualified mortgage loan, also abbreviated to Non-QM loan, is a flexible type of mortgage that extends a better financing option. It lets you qualify based on alternative methods rather than traditional ones. The loan comes with a lenient credit requirement and is excellent if you are self-employed. These loans are a viable option if you are:
- A property investor
- A high net worth individual
- Foreign national
- Someone with recent credit blemishes
- Looking for interest-only payment options
- Have several tax write-offs
Essentially, if you are someone who doesn’t meet the traditional mortgage eligibility criteria, non-qualified mortgage loans are for you. Besides, these do not come with a government backing similar to FHA or VA loans. Thus, you might observe more risk and a high-interest rate. But when you partner with a reliable lender, they can ease the processes significantly and help you with suitable financial products. Lenders also loan out amounts based on asset value which is a familiar concept with real estate investors. You can also obtain interest-only loans, which is another popular alternative amongst investors.
Non-QM Loans vs. Qualified Mortgage: Non-qualified mortgage is the alternative to a qualified mortgage. It does not necessitate extensive documentation or limit the properties you can finance, as with QM loans. The QM loans aren’t also available to foreign nationals, which isn’t the case with Non-QM loans. So, trust a professional to provide you with a tailored and exceptional service when you are out looking for non-qualified mortgage loans.
When talking about a qualified mortgage, these have a set of established rules with stable borrowing obligations. This helps protect borrowers’ interest and prevents them from entering into mortgage terms they cannot afford. However, Non-QM loans aren’t under similar restrictions yet prove to be a credible option. Rest assured, you aren’t putting yourself in a risky venture. If you are a freelancer, low credit borrower, gig-worker, living on investment proceeds, or someone who cannot meet the standard mortgage requirements, a Non-QM loan helps you obtain credit in more creative ways.
Benefits: Non-qualified mortgage loans are beneficial to borrowers for various reasons. Sure, there may be risks, but its advantages outdo the contingencies. We’ll also talk about the uncertainties of getting Non-QM loans in a later section. But here we list the opportunities you can secure Non-QM loans for better decision making:
- Employment history isn’t reviewed
- Personal income isn’t calculated
- You do not need a reserve
- Foreign nationals can apply
- Underwriting flexibility
- Bad credit score reports can also qualify
- Down payment can be as little as about 10%
- Flexible terms
- Allows DTIs as well
- Alternative documentation may be allowed
- Suitable for unconventional, non-salaried workers
For many, QM loans are a potential pathway to make plausible and timely investments. However, when lenders maintain a reasonable standard, Non-QM loans are also an excellent option.
Risks: On the downside, one of the primary risks of a Non-QM loan is a higher interest rate along with substantial upfront fees. Also, these aren’t readily available. The inability to pay back if your financial situation changes is another major drawback. But for that matter, defaulting on any loan is always risky. Also, be forewarned – not all lenders offer non-qualifying loan products, which is why you must shop around for Non-QM loans and secure the best deal possible on your mortgage.
Non-QM Loans Are On The Rise.
Non-QM lending had touched a record of $22 billion before the COVID-19 outbreak. But eventually, the momentum seems to be building up with non-qualified mortgage loans. More and more borrowers are exploring Non-QM products to suffice their property investment needs. These are a great alternative for those who do not have a spotless credit history or have an inconsistent income stream. Over the next few years, the market is expected to reach over $300 billion annually. It is time for borrowers to show interest in this viable product and lenders to offer unique and customizable solutions.
Are You Looking For A Non-Qualified Mortgage Lender?
Real Estate Funding Solutions offers various non-qualified mortgage products allowing you to qualify as a borrower. So, whether you are a first-time or a seasoned real estate investor, or a potential homebuyer, our non-qualified mortgage products can help you fund your purchase stress-free. Besides, you will not have to jump through unnecessary hoops delaying the process.
Still aren’t sure and got more questions, don’t fret. We are happy to assist you with the right products.
Contact us right away.