Many mortgages went into default more than ten years ago because the borrowers could no longer make the payments. The high number of mortgages that initially assisted the borrowers in purchasing the homes but ultimately proved to cause those homeowners financial difficulty contributed to the rise in foreclosures. Non-QM lenders have modified their products today to offer secure alternative financing options.
The Qualified Mortgage Rule was established by the CFPB (Consumer Financial Protection Bureau) in 2014. This rule established requirements for lenders, including the need to confirm the borrower’s capacity to repay the mortgage and the need to offer mortgage products that minimize risk for both the lender and the borrower. Today, a mortgage is referred to as a Non-QM loan if it does not meet the criteria for a qualified mortgage.
Update April 24, 2022: Numerous non-QM mortgage options are once again available. These include recent bankruptcies, bank statement loans, and numerous other non QM loan types.
What is a Non-QM Loan?
For those who are unable to fulfill the minimal requirements for qualified mortgage loans, there is the Non-QM loan option. Non-QM loans might have higher fees than qualified mortgages, interest-only or balloon payments, and a higher debt-to-income ratio may be permitted.
Non-QM loans are also available to borrowers who have strong credit histories and stable incomes but are seeking mortgage options other than those that their local bank may provide. The Non-QM loans are for the following individuals:
Types of Non-QM Loans
A few examples of the different loan programs that non-QM lenders might provide are as follows:
Contact us, and no matter what your needs are, we can assist you in finding a mortgage.
Who are Non-QM Loans For?
Non-QM loans are for the following individuals or scenarios below. These are merely a few instances, so if you believe you do not meet the requirements for a conventional mortgage, get in touch with us so we can discuss your loan options.
Qualified Mortgage Requirements
To fully comprehend what a non-QM loan is, you must first be aware of the conditions that must be met for a qualified mortgage.
Non QM Loan Requirements
The DTI and income documentation requirements for most non-QM loans are flexible, but the required down payment is typically higher. Here are the basic non QM loan requirements.
Down payment: A non-QM loan requires a down payment that starts at 10% and increases over time. Your credit score and the type of non-QM loan you require will determine this.
Credit Score – A non-QM loan requires a minimum credit score of 580. You can anticipate that your down payment will be at least 25% or more because most lenders won’t go that low.
Income documentation: If you have a non-QM loan, all of your documentation may be required. Others will not require much documentation at all. This depends on the circumstances of each borrower, including their employment status (W2 or self-employed), bankruptcy history, and more. If you require no-doc loans, they are offered.
Certain non-QM loans do not consider the debt-to-income ratio (DTI). However, the programs that do will permit a debt-to-income ratio of up to 50%.
You can use this form to see if you can get a qualified or non-qualified mortgage by filling it out if you want to see if you qualify for a mortgage.
Ability to Repay Rule
When assessing and approving a loan application, the lender is required by the ability-to-repay rule to confirm the following:
Non-QM lenders will help you buy a home or refinance if you are unable to meet the above requirements for ability to repay.
Pros and Cons of Non QM Loans
The following are the benefits and drawbacks of a non-QM loan, or its pros and cons.
These are merely a few things to take into account when speaking with Non-QM lenders to evaluate your mortgage options.
Top Non-QM Lenders
These are some of the top portfolio lenders or non-QM lenders available today. Some of them are people we work with, and we pay close attention to how the rules change. Some lenders will offer programs that others will not. The rates these lenders offer are also not the same.
By filling out this form and providing us with just a few basic details about your loan scenario, you can help us determine which one is the best choice for you. After that, we will reply to you right away with your top choice.
The risk involved for both the borrower and the lender is the reason why interest-only loans are regarded as non-QM loans. If the borrower only pays interest, the principal balance will never be reduced. There would be little equity in the home if the housing market tanked, which could result in both parties going into debt.
Negative amortization loans are regarded as non-QM loans because they frequently produce payments that are less than the minimum interest amount accrued each month. This means the loan balance is actually increasing over time. Due to the fact that they owed more money than their homes were worth in the early 2000s, many homeowners abandoned their properties.
What are the non-QM mortgage rates? You can anticipate that non-QM mortgage interest rates will be marginally higher than those for qualified mortgages or conforming loans.
There are non-QM lenders who will accept credit scores as low as 500 FICO, so there are no minimum credit scores needed for a non-QM mortgage. However, some lenders recently increased their minimum credit score requirements. If you have a poor credit history, we can assist you in finding the best lender.
Mortgage brokers may be able to assist with non-QM loans if they have a good relationship with the right lenders. Mortgage brokers will submit an application to be a direct lender-approved broker. The mortgage broker will have access to non-QM loan programs if that lender offers them.
In the following states, Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, we can assist you in finding a non-qm lender.
Who are the biggest non-QM lenders?
- Company: Fairway Independent Mortgage Corp. Headquarters: Madison, WI. …
- Company: Angel Oak Lending. Headquarters: Atlanta, GA. …
- Headquarters: Chicago, IL. …
- Company: CoreVest Finance. …
- Company: Acra Lending. …
- Company: CIVIC Financial Services. …
- Company: A&D Mortgage. …
- Company: Oaktree Funding Corp.
Do banks do non-QM loans?
There are still some financial institutions that provide non-qualified mortgage loans for residential purchases even though many lenders have shied away from subprime and non-qualified mortgages. When compared to other home loans, you should anticipate paying a significantly higher interest rate on these types of mortgages.
Does Wells Fargo offer non-QM?
The market for non-QM home loans is acknowledged by lenders like Wells Fargo, who are acting to fill it. High net worth individuals who do not want to lock up their money in a home and who are aware of and capable of managing the risks that such a loan entails frequently request interest-only mortgages.
What percentage of mortgages are non-QM?
However, in 2022 the non-QM share nearly doubled to account for 4% of the first mortgage market. Although the non-QM loan only makes up a small portion of the current mortgage market, it is crucial in supplying credit to homebuyers who cannot get financing through the GSE or government channels.