Are you preparing to buy a home or investment property and considering your financing options? Non-Qualified Mortgages (also called non-QM mortgages) have emerged as an alternative option for borrowers whose financial profiles don’t align with traditional lending criteria. We understand that not all borrowers are the right fit for a conventional loan, FHA loan, or VA loan. That’s why we offer multiple non-QM options for our clients who are ready to invest but don’t fit the traditional mold.
If you want to learn more about non-QM loans, we are here to help. Contact us any time, and keep reading for information you need to move forward with confidence in your investment journey.
What is a Non-QM Mortgage?
Non-Qualified Mortgages are home loans that do not meet the stringent criteria set by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. Unlike Qualified Mortgages (QM), which adhere to strict standards such as a maximum debt-to-income ratio, non-QM mortgages offer more flexibility in underwriting criteria.
These are unique loans that cater to borrowers with unique financial situations like self-employment, non-traditional income sources, or other factors that fall outside conventional lending parameters. If you are finding yourself confident that you can afford to manage a real estate investment but fail to meet some of the standard criteria for traditional loans, you will easily understand why these loans exist.
There are multiple types of non-QM loans that fit different scenarios. To learn more about some of our most popular non-QM loans, check out these posts about bank statement mortgages and cash flow mortgages.
Why Choose a Non-QM Loan?
There are a few reasons our clients choose to apply for non-QM loans.
Non-QM mortgages are suitable for individuals with unconventional income sources, such as self-employed individuals or those with variable income. Traditional mortgages usually require extensive documentation of income stability, which can be challenging for individuals with non-traditional income streams.
Unique Financial Situations
Borrowers with unique financial situations, such as recent self-employment, a recent bankruptcy, or irregular income patterns, may find non-QM mortgages more accommodating. These loans take a more holistic approach to underwriting, considering the borrower’s overall financial picture rather than relying solely on traditional metrics.
Individuals with credit challenges, including recent foreclosures or lower credit scores, may still qualify for a non-QM mortgage. While we do consider creditworthiness for our non-QM borrowers, we take a more nuanced approach, considering compensating factors and the overall financial health of the borrower.
We know that many borrowers are ready to take on a mortgage even if they have some financial factors that would traditionally be considered a red flag.
Non-QM mortgages can be a valuable tool for real estate investors. Whether purchasing an investment property or engaging in real estate ventures, non-QM loans provide flexibility in financing, allowing investors to leverage their assets strategically.
Cash flow mortgages in particular can be ideal for investors. They are approved based on the revenue potential of the property in question, not your income.
Alternative to a Jumbo Loan
Borrowers seeking loan amounts that exceed conventional conforming limits may find non-QM mortgages to be a viable alternative to jumbo loans. Non-QM loans may offer competitive terms for borrowers looking to finance higher-priced properties, so make sure to compare your options before choosing the right financing route for you.
Faster Turnaround Time
Non-QM mortgages often involve a streamlined approval process. With less rigid underwriting criteria, these loans can offer quicker turnaround times compared to traditional mortgages, making them ideal for time-sensitive transactions.
How to Apply for a Non-QM Loan
We can help you with the entire application process, showing you your options and comparing the terms of various non-QM loan types. Ready to apply for a non-QM loan or have more of your questions answered? Contact us any time.