Finding a non-qualified (non-QM) lender today is getting more and more easy compared to the early years post the 2008 crisis. The challenge is to find the right one that understands and caters to your unique borrower needs.
After the Dodd-Frank Act split mortgage categories into qualified and non-qualified in order for lenders to be more meticulous of the loan products they offer and who they give them to, a significant portion of the borrower market were cut out off of the opportunity to get the financing they need.
These people are not necessarily subprime borrowers, but are those who might be holding two jobs or jobs by season, those who receive pay via commissions, and generally those individuals whose income may not come with regular paychecks and W2s but otherwise have good credit standing.
A non-QM loan usually takes the form of the following:
a) Interest only loans that require interest payments at the first part of the mortgage term. After this specified period, fully amortized payments are then paid.
b) Loans given to borrowers with debt-to-income ratio higher than 43 percent
c) Loans that use other methods to verify documented income
d) Loans that charge over 3 percent in origination costs
All of the above are not allowed with FHA, VA, USDA, or other government-backed mortgage qualifications. And most people do not usually fall into this type. Hence why the non-QM market thrives.
It is of primary importance to evaluate your purpose for getting a Non-QM loan as that will help you determine which lender suits you best. Many non-QM lenders are specialists and cater to only a type or two of borrowers. Some prefer self-employed borrowers such as small-time entrepreneurs and businessmen, while others accommodate slightly risky borrowers with compensating factors.
Finding the right lender
When choosing which lender to get a non-QM loan from, you must consider a lender’s flexibility. It is the ability of the lender to flex their offers and make changes based on the nature of your situation as a borrower in need. This lender characteristic is easy to find in small, private lenders who keep their loans on their portfolio and do not sell them to secondary markets.
If such is the case, they do not have to adjust to the whims of their investors and are therefore more capable of making adjustments to their loan offers.
If you cannot find a specified non-QM lender in your area, you can try with your bank and see if they can arrange for a loan that fits your criteria. If they cannot accommodate your loan request, expand your search online.
Finding the non-QM lender to work with may require a bit of patience and extra effort, but with today’s looser mortgage guidelines, it is definitely not impossible. Start your search here.