In this blog, we will be covering the reasons for using non-QM loans versus traditional mortgages for home purchases. Non-QM loans are a wide field. Non-QM loans are non-Qualified mortgages which means they do not follow the strict CFPB rules and regulations. However, non-QM loans still need to adhere to RESPA and residential mortgage regulations and guidelines on primary owner-occupant homes.
In the following paragraphs, we will cover the reasons for using non-QM loans versus traditional mortgages. Non-QM loans are not just for borrowers with bad credit. There are many instances why higher credit profile borrowers with good credit and high net worth have reasons for using non-QM loans versus traditional mortgages. In the following paragraph, we will cover the reasons for using non-QM loans versus traditional mortgage loans.
What Are Non-QM Mortgages?
There are countless reasons for using non-QM loans. Non-Qualified Mortgages also referred to as non-QM loans, are alternative mortgage loan programs that do not follow Qualified Mortgage guidelines of the Consumer Financial Protection Bureau (CFPB). Non-Qualified Mortgages do not necessarily follow CFPBs ability to repay (ATR) Qualified Mortgage Guidelines. Non-QM loans are portfolio loans.
By no means are non-QM loans hard money loans or high-risk loans for high-risk borrowers. Non-Qualified mortgage rates are based on credit scores, loan to value, type of property, and other risk factors just like traditional mortgage loans.
Lending Guidelines on NON- QM Versus Traditional Mortgages
Non-QM loans are portfolio loans. Portfolio loans mean lenders will keep the loan in their portfolio or sell it to private institutional investors. There is no set uniform agency mortgage guidelines on non-QM loans. Each individual non-QM mortgage lender sets its own non-QM lending requirements.
What Are The Main Reasons For Using Non-QM Loans For Borrowers?
Non-QM lenders can make exceptions when it comes to the guidelines of each individual borrower. In general, non-QM mortgage lenders use the common sense principle applies approach on a case-by-case basis for each individual mortgage borrower. A non-QM lender can make exceptions such as exceeding the debt-to-income ratio to giving exceptions on credit tradelines or some other guideline changes.
Mortgage Rates on Non-QM Versus Traditional Mortgages
Mortgage Rates on Non-QM versus traditional mortgages are normally higher than traditional conforming loans. Down payment requirements and closing costs are higher on non-QM versus traditional mortgages.
Mortgage Rates on Non-QM versus traditional mortgages are higher than government and conforming loans. Depending on the loan program, some costs are substantially higher than traditional loans.
What Are The Fees and Costs of Non-QM Versus Traditional Mortgages?
Popular Non-QM Mortgage Loan Programs
Non-QM loans are becoming increasingly popular. Non-QM loans benefit borrowers who either cannot qualify for traditional mortgages or exceed the maximum loan limit of conforming loans. Non-QM loans are known for using non-traditional income as qualified income. The 12 months of bank statement deposit loans for self-employed borrowers do not require income docs. Lenders will go off the average of the past 12 months of bank statement deposits.
Reasons for using non-QM loans are due to the various no-income documentation loan programs. Other reasons for using non-QM loans are due to alternative mortgage loan options such as no-doc loans, DSCR mortgage loans, stated-income loans, asset-depletion, and 1099 income-only mortgage loans. Non-QM Mortgage Brokers has hundreds of wholesale mortgage loan options on non-QM and alternative financing loan options for owner-occupant primary homes, second homes, and investment properties. Other reasons for using non-QM loans is the mortgage process is simple. Most non-QM loans close in 30 days or less. Non-QM Mortgage Brokers has dozens non-QM options.
