In today’s ever-changing financial landscape, it pays to stay ahead of the curve. Non-Qm Loans are becoming increasingly popular, offering a variety of benefits that traditional bank loans simply can’t match. But which lender should you choose? And who can benefit most from these offerings? Find out all this and more in this article on Unlocked Opportunities: What To Look For In A Non-QM Lender And Who May Benefit From A Non-QM Loan.
What is a Non-QM Loan?
A Non-QM loan is a mortgage that does not fit into the guidelines set by the Qualified Mortgage rule. This rule was put in place by the Consumer Financial Protection Bureau (CFPB) in 2014, and it established standards for lenders to follow when approving mortgages. The goal of the Qualified Mortgage rule was to make sure that borrowers could afford their loans, and to protect them from predatory lenders.
Non-QM loans can be beneficial for borrowers who may not meet all of the Qualified Mortgage criteria. For example, self-employed borrowers or borrowers with non-traditional income may have trouble qualifying for a QM loan. Non-QM loans can also be helpful for people who are looking to buy a home that doesn’t fit into the standard “cookie cutter” mold – like a jumbo loan or an investment property.
If you’re considering a Non-QM loan, it’s important to find a lender who is experienced with these types of loans. Not all lenders offer Non-QM loans, and those that do may have different guidelines and requirements. It’s important to shop around and compare offers from multiple lenders before making a decision.
Benefits of Non-QM Loans
A Non-QM loan is a mortgage that does not fit into the standards of a qualified mortgage. These types of loans are for borrowers who may have difficulty qualifying for a traditional mortgage because of factors such as self-employment, recent changes in income, or large deposits not derived from employment income. While these loans may carry a higher interest rate than a qualified mortgage, they offer opportunities for borrowers who would not otherwise be able to obtain financing.
There are many benefits of Non-QM loans, including:
- The ability to obtain financing when you may not qualify for a traditional mortgage
- Flexible qualification criteria that consider factors such as self-employment or changes in income
- Potentially lower interest rates than other types of alternative financing
- A wide variety of loan programs to choose from
If you are looking for an opportunity to buy a home or refinance your current home, a Non-QM loan may be the right option for you. Speak with a loan officer today to learn more about how a Non-QM loan could benefit you.
Types of Borrowers Who May Benefit from a Non-QM Loan
There are several types of borrowers who may benefit from a Non-QM loan:
- Borrowers with Unique Income Sources: If you have income that doesn’t fit into the traditional W-2 employee model, you may still be able to qualify for a Non-QM loan. This could include income from investments, pensions, rental properties, or other sources.
- Borrowers with Self-Employment Income: If you’re self-employed, you may find it easier to qualify for a Non-QM loan than a traditional mortgage. This is because traditional lenders often require two years of tax returns to verify income, while Non-QM lenders may only require one year.
- Borrowers with Less Than Perfect Credit: If your credit score isn’t perfect, you may still be able to qualify for a Non-QM loan. This is because Non-QM lenders often have more flexible credit requirements than traditional lenders.
- Borrowers Who Need Alternative Documentation: If you can’t provide the traditional documentation required by a traditional lender, you may still be able to qualify for a Non-QM loan. This could include borrowers who are recently divorced or widowed, or those who have been self-employed for less than two years.
What to Look for in A Non-QM Lender
If you are self-employed, have non-traditional income, or are otherwise unable to qualify for a traditional mortgage, a non-QM lender may be the right choice for you. Here are some things to look for in a non-QM lender:
- Flexible eligibility requirements – Non-QM lenders typically have more flexible eligibility requirements than traditional lenders. This means that you may be able to qualify for a loan even if you don’t have perfect credit or a high income.
- Competitive interest rates – Non-QM loans often come with competitive interest rates, so you can save money on your mortgage payments.
- Personalized service – Non-QM lenders typically offer personalized service and attention to their borrowers. This means you can get help with the loan process and have your questions answered by someone who is familiar with your situation.
- A variety of loan options – Non-QM lenders offer a variety of loan options, so you can choose the one that best fits your needs. You may be able to get a fixed-rate loan, an adjustable-rate loan, or even a balloon loan.
- No prepayment penalties – Many non-QM lenders do not charge prepayment penalties, so you can pay off your loan early without penalty.
How to Qualify For Non-QM Loans
If you’re like most people, you probably think that all mortgages are the same. But that’s not the case. There are actually several different types of mortgages, and each one has its own set of rules and requirements.
One type of mortgage is known as a “non-QM loan.” These loans are designed for borrowers who may not qualify for a traditional mortgage.
So, how do you qualify for a non-QM loan? The eligibility requirements will vary from lender to lender, but there are some general guidelines you can follow.
First, you’ll need to have a good credit score. Most non-QM lenders require a credit score of at least 680. If your score is lower than that, you may still be able to qualify if you have strong compensating factors, such as a large down payment or significant equity in your home.
Second, you’ll need to have a steady income. This can come from employment, self-employment, investments, or other sources. Non-QM lenders will typically want to see at least two years of consistent income before they’ll approve a loan.
Third, you must have sufficient assets to cover the down payment and closing costs. Non-QM loans typically require a down payment of 10% or more. And fourth, you must be able to document your income and assets in order to prove to the lender that you meet all underwriting requirements.
Understanding the Costs and Risks of Taking a Non-QM Loan
When you’re a non-QM borrower, it’s important to understand the potential costs and risks associated with your loan. While a non-QM loan may offer more flexible terms than a traditional mortgage, it’s important to remember that these loans come with higher interest rates and fees.
Before you take out a non-QM loan, be sure to understand the risks involved. Here are some things to keep in mind:
Interest Rates: Non-QM loans typically have higher interest rates than traditional mortgages. This means you’ll end up paying more interest over the life of the loan.
Fees: Non-QM loans also come with higher fees than traditional mortgages. These include origination fees, discount points, and closing costs. Be sure to factor these costs into your budget before taking out a non-QM loan.
Prepayment Penalties: Some non-QM loans come with prepayment penalties. This means that if you pay off your loan early, you’ll be charged a fee. Be sure to ask about prepayment penalties before taking out a non-QM loan.
Balloon Payments: Balloon payments are common with non-QM loans. This means that you’ll make smaller monthly payments for a set period of time, followed by one large payment at the end of the loan term. Be sure you can afford the balloon payment before taking out a Non-QM loan.
Alternatives to Non Qm Loans
If you’re not able to qualify for a traditional mortgage, there are still plenty of options available to you. Non-QM loans are a great way for those with unique financial situations to buy a home. Here are some things to look for in a non-QM lender:
- Experience: Make sure the lender you choose has experience with non-QM loans. There are a lot of different types of non-QM loans, and you want to make sure your lender is familiar with the type of loan you need.
- Flexibility: Every borrower’s financial situation is different. You want to choose a lender who is willing to work with you on finding the right loan for your unique needs.
- Competitive rates: Just because you’re getting a non-QM loan doesn’t mean you should pay higher interest rates. Shop around and compare rates from different lenders before choosing one.
- Good customer service: The process of getting a non-QM loan can be complex and confusing. Choose a lender with good customer service so you can get help when you need it.
Conclusion
With the right non-QM lender, you can unlock different opportunities for your clients who may not qualify for traditional mortgages. By looking out for certain characteristics such as pricing structure, product offerings, and customer service when choosing a non-QM lender, you can help ensure that your clients find the best option to meet their needs. Furthermore, by understanding which types of borrowers often benefit from these loans—such as self-employed individuals or those with lower credit scores—you can increase the chances of providing an excellent experience to those seeking a loan with less stringent requirements.
