Non-Qualified Loan

Understanding ITIN Loan Programs

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Foreign nationals often want to set down roots in the United States. Most loan programs require a social security number, which you don’t have. This may make you feel like it’s impossible to get a mortgage, fortunately, there are ways around it. If you have an ITIN, and you meet the loan requirements, you may secure the financing you desire for a mortgage.

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Credit is Important

Before lenders will approve you for a mortgage, they need to see your financial habits. Do you pay your bills on time? Do you overextend your credit? Lenders need these answers.

The only way to get those answers is with a credit history. Without a social security number, though, you won’t have one. Fortunately, many creditors extend credit with just an ITIN.

We recommend starting small. Apply for a secured credit card, which is a credit card with a deposit. The credit card company reports your credit card usage and payments to the credit bureau in exchange for a deposit on your account. The credit card company will give you a credit line equal to the deposit. If you put $100 down, you get a $100 credit line.

As you use your credit and pay your bills on time, you will build up credit. You may want two of these trade lines just to build up your credit. Once you establish yourself for six months or so, apply for an unsecured credit card or personal loan. Keep your loan amount request small, but see if you can get any other type of loan that will help build your credit.

As you continue to pay your bills on time and use your credit responsibly, you’ll obtain a credit score that shows financial responsibility.

Stay Employed

Lenders also put a lot of emphasis on your employment. They want to know that you’ll be at the same job for the foreseeable future. Because you are an ITIN borrower, you already pose a risk of default. Lenders like to see at least a 2-year stable employment history when you don’t have a social security number.

In addition to your work history, you must prove your work ‘future.’ Because you are a foreign national, lenders care about your plans. Will you be here next year? Will you be here in three years? Most lenders require an employment contract that goes through at least the next three years. If you don’t have a contract good for at least three years, it could make it harder to get an ITIN mortgage.

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Make a Large Down Payment

Unfortunately, as an ITIN borrower, you’ll need a larger down payment than borrowers with a social security number. As a general rule, plan on at least a 20% down payment. In some cases, you may need more. Lenders determine the required down payment on the riskiness of your loan.

For example, if you have a low credit score, you will need a larger down payment than someone with a higher credit score. You’ll also need a larger down payment if you have a lot of outstanding debt compared to your gross monthly income.

The down payment helps offset the risk of default. The lender knows that there is at least a little equity in the home. If you stop making your payments, the lender can sell the home for a profit and keep the funds as repayment.

Before you use funds for a down payment, you have to show its origination. In other words, you need a bank account here in the United States. You also need to be able to show regular deposits. It’s best to have your income deposited directly into your account. It’s easy for lenders to source (your paystubs) and it’s consistent. Lenders want the money in the account for at least two months before they will count it for your down payment. This way they know the money didn’t come from another loan as it would show up on your credit report.

Save Monthly Reserves

In addition to your down payment, you need money in a reserve account. Most lenders require six months’ worth of mortgage payments in your savings account or any other liquid account. If your mortgage payment were $1,200, you would need at least $7,200 in a bank account. If you run into financial trouble, the reserves are there to bail you out. Lenders rely on the reserves, so the more money you have on hand, the higher your chances of securing approval.

Have Compensating Factors

Lenders look for any compensating factors that make up for the risk that being an ITIN borrower pose. The compensating factors could be any of the following:

  • High credit score
  • Low debt ratio
  • More than six months of reserves on hand
  • Long work contract

Try to offset the riskiness of being an ITIN borrower by providing as many positive factors as you can. The more reasons a lender has to trust that you won’t default on your loan, the more likely you are to get the mortgage approval.

ITIN loan programs often foreign nationals a way to buy a home in the United States. With good credit, a decent debt ratio, and enough money saved, you should be able to get the loan you need to buy a home.

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How Non-Conforming Loans Work

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Non-conforming loans took a break after the housing crisis. Unless you had perfect credit, you weren’t getting a loan. Today, things have changed. You can secure a subprime loan from a variety of lenders. Borrowers that are self-employed, have less than perfect credit, or don’t have consistent income are great candidates.

You’ll need a lender that funds the loans in-house. Read on to see how to proceed.

Call Different Banks

The first step is the hard part. You have to call around to find banks that keep loans on their books. Some banks advertise that they provide non-conforming loans. Others, you’d never know unless you called. Try to steer away from the bigger banks – they typically only hand conforming and government-backed loans. You want banks that are more local and smaller. They’re more likely to have a mortgage option for you.

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Don’t restrict your search to just a few banks. Consider credit unions and mortgage lenders even outside your general area. If you have a specific circumstance, there might be a lender out there that specializes in it.

Ask About the Non-Conforming Home Loan Programs

Every bank will have a different program. This isn’t like the conforming loans where there are Fannie Mae/Freddie Mac guidelines everyone must follow. There is no secondary investor in this case. The bank has the final say.

This means they may be able to grant exceptions. It pays to be upfront and honest with each lender. Let them know your exact circumstances. They may be able to come up with a program for you. Just be prepared to disclose your income, assets, credit score, and employment information. The more information you provide up front, the more they will be able to help you.

Apply for the Non-Conforming Loan

Once you narrow your lenders down to a few, go ahead and apply for the loan. This way the lender can formally pull your credit. They can also evaluate your loan file a little closer. By doing this, the lender must also send you a Loan Estimate within 3 business days. This is what you are after. This is where you’ll get the information on the true cost of the loan.

Once you have the Loan Estimates from a few lenders, compare them. Look at the interest rate and the APR first. These are two major factors in your loan. The interest rate is the interest you’ll pay each month. The APR is the annual interest rate. It’s a true reflection of the cost of the loan.

When you look at the loans side-by-side, focus on the APR. This way you can tell which loan will cost you the most in the long run. You might find a loan with a low interest rate but very high APR. This usually means the loan has higher fees. You can decide if this is something you want to pay for the next 30 years. The lower interest rate might not mean as much to you when you look at it in those terms.

Watch Out for Fees

Every loan has fees unless you negotiate a no-closing cost loan with your lender. But, just because you have a non-conforming loan doesn’t mean you should overpay. Pay close attention to the origination, discount, and processing fees. Some lenders break the fees down individually. Others put them as one lump sum. Either way, you can total up the fees and see which one offers the best deal.

The non-conforming loan can help you get into the home you want. Today, there are hundreds of lenders out there. It’s up to you to do the hard work and see which one is right for you. There aren’t cut and dry regulations for these loans. Each lender will have unique programs. Use this to your advantage and find the loan that is right for you.

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The Auto Lending Industry is Tightening Credit, How About Mortgages?

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Slowing demand in cars is causing automakers to cut down production to balance the rise in available inventory. April is the fourth month in a row where automakers report poor sales. Apparently, fewer Americans are buying cars now. But what caused this?

The possibility for disaster

You might be familiar of the subprime auto loan crisis that has recently grabbed headlines. A quarter of the American auto loan debt of $1.2 trillion is lent to high-risk borrowers or those who have not-so-stellar credit scores. As the panic sinks in among lenders, many tried to mitigate disaster by setting stricter guidelines and qualifications on their loan services and products. Now, a third of new auto loan originations are given to borrowers with FICO scores 720 and up.

The tightening of credit, along with the rise in interest rates is making it harder for many potential borrowers to get financing for their vehicle-buying intent. Many are reconsidering their intention to buy new cars, with others just settling for used ones.

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But the question right now is: is the mortgage sector following the auto loan sector’s example?

A new report from the Federal Reserve’s Senior Loan Officer Survey has shown that commercial real estate lending standards tightened in the second half of 2016 following a warning by the Office of the Comptroller of the Currency regarding the easing of loan standards for mortgage originations. An analysis of a sample of fusion commercial mortgage-backed securities spanning the period of 2012 through the first quarter of 2017 also showed a significant drop in LTV (loan-to-value) ratio this year which indicates that commercial mortgage-backed securities lenders are tightening credit as well.

Not again

Remember that the boom of subprime mortgages caused the collapse of the housing market and paved the way for the Great Recession back in 2008. Of course, nobody would want to take that disastrous dive once more. Still, this does not prevent many other private players from taking advantage of the lack in competition. Those who choose to do so are racking up $20.4 billion last year alone, a significant rise compared to $12.2 billion the previous year.

Not plunging into crisis is a collective effort. But in this game of risk and rewards, the intent is always individually-motivated. Are we mature enough as a collective to never make the same mistake twice?

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How Big can a Jumbo Loan be?

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One example of a non-qualified mortgage loan is a jumbo loan. It is called a “jumbo” loan because it surpasses the established conforming loan limits.

During the attempt to define what a conforming loan is, one goal was to establish a limit for the loanable amount. This limit was laid down by the Federal National Mortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac).

In 2017, most conventional mortgage loan are very well within the 424,100 limit. There are a few exceptions for high cost areas such as those in Florida and California. These high cost areas have loan limits exceeding $636,150.

How Big is a Jumbo Loan?

Jumbo loans are, more often, more than half a million dollars. It is intended to finance luxury houses. Most of these properties are located in high cost areas where the real estate market competition is really steep.

Huge Money = Stringent Requirements

In conventional loans, there are standard credit requirements a borrower needs to meet in order to qualify for the loan. Since a jumbo loan is considered a nonconforming loan, it is not backed up by the government should a borrower file lawsuit against the lender. Also because of the huge amount of money involved, the lending institution is taking a greater risk on jumbo loans.

If you are trying to apply for this type of loan, expect to be under stringent underwriting, and tighter credit requirements.

Credit Score

Make sure you have a good credit standing with a score of at least 620. This is considered a fair credit score. But to increase your chances of getting approved on a jumbo loan you will  need a score higher than 720.

Documentation

In the years before the U.S. recession happened jumbo loans were approved with less paperwork required. Many can go away with this loan with very little income verification needed. Much has changed in the recent years.

When the ‘Qualified Mortgage’ loan was defined, it increased the need for standard documentation and verification. While jumbo loans can be considered Non-QMs, lenders are now asking borrowers to provide documentation as proof of their income.

Examples of these are Proofs of income and liquid assets, and proofs of ownership for non-liquid assets.

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Down Payment

With a stellar credit, you may find a one that only requires a 10 percent down payment. This may mean lesser money to put upfront. However, a small down payment may increase your monthly interest rate or affect your loan terms.

Make sure you assess your financial situation and you read the loan agreement first before you decide to pay cash up front.

Debt-to-Income Ratio

Not all jumbo loans are non-QM. Those that fall under the qualified mortgage bracket may have standard DTI requirements. Your DTI cannot exceed 43% for qualified jumbo loans.

If your DTI is way over that cap, a non-QM jumbo loan is what you need. It does not mean though that the lender will not perform a verification if you can afford the monthly payables. There will still be a need for verification.

Income

One big factor that comes into play is income. Because of the huge size of the loanable amount, the income is where lenders find security. Your income and other reserves must be able to cover this big debt. For the self-employed, you may need to provide tax returns and bank statements. For traditional borrowers, pay stubs and W2 be asked from you.

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Are Non-Qualified Loans Really Safe?

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Are Non-Qualified Loans Really Safe?

When your credit is in bad shape, let’s face it, lenders will turn you down. And just when you think your credit score is the last nail in the coffin, one loan could be the answer. Non-Qualified mortgage loans give some people a chance to have a loan.

Non-Qualified Mortgage Loans, or Non-QM as others call it, are loans that do not fit the Qualified Mortgage Definition.

The aftermath of the recent housing crisis pressed lawmakers to draft new regulatory reforms. It gave birth to the Consumer Protection Act and the Dodd-Frank Reform.

There are minimum standards that mortgage lenders need to meet in order to be classified as a Qualified Mortgage. These new laws governing QMs also protect the lenders in the event that a borrower fails to repay his/her debts and files a lawsuit against the lender.

Now, because the rules are complex and stringent, some lenders noticed that it would be impossible for some people to be eligible for QM loans. Non-QMs came about when lenders started to come up with loan programs to cater to these people.

And since they are not QM loans, they lack the liability protection that QM loans have.

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Are Non-QMs Safe?

Just because they are not Qualified Mortgage loans, it does not mean that Non-QMs are high risk.

Some lenders of this type of loan will still look at your documents and scores. But instead of denying the borrower’s application because of some problems they see in these papers, they will adjust the interest rate or down payment to cover up for these deficiencies.

One example of a Non-QM loan is the “Interest-Only” Loans. Who offers them? Big banks, such as the Bank of America and Chase, make Interest-Only loans available to those who are looking for one.

As its name suggest, the borrower is required to pay the interest from the principal amount within a given term. After this term, the principal will then be paid off. This can be done through a lump sum payment, or the mortgage can be refinanced.

Because of this, applicants may have to go through a rigorous underwriting process. Borrowers may be required a higher FICO score and a very Low LTV to qualify.

Are Non-QMs for Everyone?

Borrowers who have sporadic income but having large assets are the target market for this loan type. For example, there are many Americans who have a steady flow of money but lack the ability to provide a W-2. This does not mean they do not have the ability to repay the loan which is required for a QM. A Non-QM can be perfect for them.

Non-Qualified Mortgage lenders give loan opportunities to individuals who won’t be eligible for a QM loan but can very well afford it. Without this loan type, there will be a huge inadequacy of financing options. Many Americans won’t be able to stay in their homes or buy properties.

Talking to a lender will help you understand Non-QMs better. A lender will also advise you whether it is perfect for you or not. Do not hesitate to learn more about it.

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Finding Lenders for Your Multiple Properties

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Finding Lenders for Your Multiple Properties

If you are an investor looking to add another property to your portfolio, you may find it a headache to come up with financing for the new property. Most banks do not lend a fifth mortgage if you already have four in your portfolio. This makes it hard to get subsequent financing for your additional properties.

Investors can get financing for up to 10 properties per Fannie Mae. However, banks are wary of giving out these loans because they are too risky. But a little bit of patience and professional help can get you to the right people.

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Qualifications

The requirements for investors to get the financing needed for their multiple investment properties include:

  • own five to ten residential properties that are also financed
  • make a 25 percent down payment or 30 percent for properties with two to four units
  • a credit score of 720
  • no mortgage payments for the past 12 months
  • no bankruptcies or foreclosures within the past seven years
  • tax records for the last two years that show the properties’ rental incomes
  • six months of PITI reserves on each of the financed properties

Another option for investors to access financing for their multiple properties is through portfolio financing. It may be hard to find lenders that offer this type of financing product but it wouldn’t be hard to qualify once you find one.

If you are familiar with the workings of the real estate industry, you can work out your connections in order to find the right one. If you turn out empty, you can inquire from your local banks or find national lenders through a broker. A non qualified loan may also be a resort for investors who have problems with their qualifications.

Finding financing for your multiple properties may be hard but it is not impossible. Begin your search here.

Why Lenders Need Your Bank Statement

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Why Lenders Need Your Bank Statement

It’s common knowledge that lenders ask you for your financial statements and bank records when you apply for a mortgage. But what exactly do lenders do with these personal and confidential records?

Taking out a home loan is a game of risk that involves not just you but also the lenders. While you got to obtain the money to own a home, your lenders have to protect their business as well and see to it that the people they are doing business with can give back what they owe.

As a way of mitigating risk, they will require you to prove that you can, indeed, pay back the money you borrow. To do this, you will have to show them that:

  • you have a source of income; and that
  • you are a responsible creditor

Now showing that you have a job or own a business is not a guarantee that you can repay what you owe. You may lose your job in the future and therefore fail to pay your loans. Or, your business can go bankrupt and you will have no source of profit to sustain your financial responsibilities.

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This is why as a means of financial security, your lender will ask for your bank records as means of verifying your statements. These documents will provide your lenders:

a) Proof of Funds

It’s not enough that you have the money there. The lender needs to verify that these funds are legitimately yours. To do this, your lenders usually go through a month’s worth of bank statements to evaluate and verify if all the assets your declared in your loan application is really yours.

b) Proof of Legitimacy

One of the most commonly-encountered issue among mortgage applicants is the cash deposits on their bank statements. Its existence in your account does not automatically guarantee that its sources are yours. Establishing legitimacy then makes it hard for some lenders to verify your finances.

This is the reason why in some cases, lenders ask their applicants to submit statements of explanations regarding their cash deposits. This is especially relevant when your down payment is a gift from a family or relative channeled to your account. If such is the case, the transaction must be duly documented with a notarized gift letter to be honored.

Consistency in your finances is a necessity when you apply for a mortgage. See to it that you properly document your transactions or these might cause delays in your underwriting. Delays in the underwriting process means longer closing time, and most possibly, higher mortgage rates.

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Finding a Non-QM Mortgage Lender

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Finding a Non-QM Mortgage Lender

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

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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.

What are the Types of Non-QM Mortgages Available Today?

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Mortgages today are classified into two categories: qualified, and non-qualified. Qualified mortgages are designed to cater to individuals who can fully demonstrate their ability to pay back a loan. But a significant part of the American population does not fall within this category. Most businessmen or self-employed individuals, as well as freelancers or those who do not receive a steady stream of income may find it hard to qualify. This is where non-qualified mortgages come in handy.

Non-qualified mortgages (Non-QM) come in different forms, and target a different segment of the housing market. Let’s look into its variety.

Interest Only Non-Qualified Mortgage Products

With interest-only loans, you pay only the interest on the loan for a specified period. After this period expires, you are then liable to pay for the interest AND the principal, which could cause your monthly payments to balloon. If you are going to take this type of loan, be sure that you are well-prepared and have money to tap into by the time the interest-only period comes to an end.

Investment Property Loans

Investment properties are treated by the housing industry as business. Hence, loans for these properties do not have to abide by the rules set by the Dodd-Frank Act. This secures the variety of the type of financing an investor or borrower can get. Different lenders may have different sets of qualification guidelines for potential borrowers.

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Loans for High Net Worth Borrowers

Banks offer big loans for individuals whose net worth are significantly high. These individuals usually do not have a consistent income but do have a significant number of assets on their name. Thus, many banks offer loans that are based on assets rather than income. These assets must be verified (in lieu of the income) in order to qualify for the loan. These asset-based loans typically loan thousands of dollars or even millions to qualified individuals. However, borrowers must be able to maintain excellent credit and put a good percentage of the loan amount as down payment.

Non-Agency Mortgage Programs

Conventional, qualified mortgage lenders will deny your loan application if your debt-to-income ratio goes beyond the 43 percent limit. This poses a problem if you are receiving irregular income or are purchasing a property with a high loan amount. Thus comes non-agency mortgage programs to your aid. Through a non-agency mortgage, you can get around the 43 percent DTI cap and secure financing for your home. However, you must be able to demonstrate to the lender that you will be able to pay back the loan. Do not take a mortgage that is more than you can afford. Make an honest evaluation of your income and prepare to deliver.

Stated Income Loans

If you are having difficulty documenting your income, but need a home loan, you can opt for stated income loans. These types of loans target self-employed individuals. For stated-income mortgages, lenders do not look at your pay stubs and W2 forms as well as your income tax records. You just need to state your income and they take your word for it. Because of this, stated income loans are deemed risky and most of them has been eliminated especially after the housing crisis hit in 2008. However, there are still versions of stated income loans that exist. One of these are asset-verified loans. Compared to some of its predecessors, they have stricter guidelines and qualification requirements.

To get asset verified loans, your asset must be reflective of your income. Moreover, you must have money on your account that is enough to cover the loan expenses should something disrupt your income flow. Qualifications depend from one lender to another. But one thing is made sure: that you can afford to pay for the loan despite vague income records, and that you will be able to pay back what you owe.

If you are looking for financing but do not fit the traditional eligibility and qualification standards required by lenders, non-qualified mortgages could be your saving grace. However, these loans are risky and there are frauds who are always ready to pounce on the unsuspecting. When you head out shopping, make a criteria for your lender, and always be on the lookout for non-credible transactions.

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How to Find Lenders that Offer Non-QM Loans?

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How to Find Lenders that Offer Non-QM Loans?

Non-QM loans are something that came about a few years ago after the Dodd-Frank Act went into effect. Non-QM loans are essentially loans that do not meet the Qualified Mortgage Guidelines. If a loan does not meet the QM guidelines, it cannot be sold to Fannie Mae or Freddie Mac. This greatly lowered the number of lenders that offer these types of mortgage, but it did not diminish them altogether – there are still plenty of lenders that offer them because of their profitability and basic ability to help potential borrowers become homeowners.

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What is a Non-QM Loan?

Basically, a non-QM loan is almost any non-conventional loan on the market, but even some conventional loans might not meet the requirements depending on the fees the lender charges. Typically, a non-QM loan does not meet the following guidelines:

  • Fully amortized loan (no interest-only payments or negative amortization)
  • No balloon payments
  • No loan terms in excess of 30 years
  • No excessive upfront fees or discount points (no more than 3% of the loan)
  • Debt ratio lower than 43%
  • Fully documented income

As you can see, these terms leave out people that would need any type of assistance in obtaining a loan. For example, self-employed borrowers that do not have enough income on standard income documents to qualify for the loan would be left out. Luckily, there are non-QM loans that lenders offer that are either sold to private investors in the secondary market or kept on their own portfolios.

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Meeting the Ability to Repay Rule

One factor that both QM and non-QM mortgages have in common, however, is the need to meet the Ability to Repay Rules. These rules state that the lender did everything possible to determine that the borrower can, in fact, afford the loan. This is especially important with low doc or stated income loans, as the lender is not using the standard format to verify the income. The lender needs to go to great lengths to determine without a doubt that the loan does not put the borrower under any type of financial hardship. Basically, the lender needs to evaluate the following:

  • The income and/or assets that the borrower will use to pay the mortgage, ensuring that they are legitimate and likely to continue
  • Verify employment
  • Full mortgage payment including principal, interest, taxes, and insurance and how they compare to your monthly income
  • Any other debts that are incurred on a regular basis
  • Residual income
  • Credit history

When the lender evaluates every area above, whether in the standard format or with their own requirements as they relate to a stated income loan, they can properly determine if the borrower can afford the loan and avoid the disaster that the mortgage crisis caused with the large number of stated income and no doc loans that were provided.

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Finding a Non-QM Lender

Finding a non-QM lender is not as hard as it was in the early days after the financial crisis. More and more lenders are opening up to the possibility of a non-QM loan. Typically, you should start with private lenders, as they have the capability of flying under the radar with Qualified Mortgages. They often create their own programs and hold the loans in their own portfolio, which gives them much greater flexibility than any other bank would have that must follow the QM loans if they want to sell their mortgages to Fannie Mae or Freddie Mac.

The best way is to start with smaller lenders in your local area. Talk to them about your specific situation to see what they may have to offer. You might be pleasantly surprised to find out that they do not follow the conforming cookie cutter approach to mortgages. If those banks do not have what you need, start looking outside of your local area at smaller banks across the nation. Any bank that caters to self-employed borrowers or borrowers that have a blemished credit history are your best bet for this type of loan, even if you are not self-employed or have a blemished credit history.

You might have your own reasons for requiring a non-QM loan, such as a debt ratio that exceeds 43%. This is not always a bad thing, sometimes there are special circumstances that put you just outside of that debt ratio, but if you have compensating factors that make up for the risk, some lenders will let it slide through. The problem is, however, that you cannot get a QM because of the excessive debt ratio. In this case, you need a lender willing to take a riskier loan and either keep it on their books or sell it to a private investor.

What it comes down to when finding a non-QM lender is plenty of homework. You are not going to find a lender as easily as you would with a QM loan since every lender provides those types of loans. Think of it as a specialized loan that you need to find the perfect lender to provide for you. In general, a lender that plans to keep the loan on their own books will give you the most flexibility because they make up their rules; there are no investors to please. If the lender will sell the loan on the secondary market, however, they will have to abide by the investor’s rules in order to ensure that the lender purchases the loan in the end.

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