Nonqualified Mortgage Loans allow lenders to cater to individuals who do not fit the profile of a conventional borrower. Research will tell you if you’re more suited for a non-QM loan. In this case, an understanding of the basic guidelines for it will prove extremely helpful.
It’s always worth remembering that, while government agencies have set standard guidelines for non-QM loans, lender specific requirements will differ. Without protection from borrower lawsuits, some banks may require additional documentation as proof that you are indeed capable of making those monthly payments, even if you’ve had blemished credit or volatile income.
Nonqualified Mortgage Loans Guidelines
Outlined below are the general areas that all non-QM lenders look into when assessing your eligibility for a Nonquaified Mortgage.
Income or Asset
You need to have a reliable source of funds in order to repay a non-QM loan. This is the reason why the lender looks into your stated income and/or assets. Having steady income is an indication that you can meet your monthly mortgage. Assets may be used as collateral, obliging the borrower to repay the loan in full to avoid losing the property that was offered as a collateral to the bank.
Employment
Steady income is almost always associated with employment. The number of years you’ve been working for the same company is an indication of how secure you are in your job. It shows that you’ve stayed on long enough to achieve both career and financial growth. This is something a company who’ll be lending you money would like to see. Lenders tend to view a borrower who has a new place of employment each month as a risk. They want to see a tenure of about two to three years.
Credit History
Your credit score may not be enough for a Qualified Mortgage per lender guidelines. But remember, a ‘bad credit score’ is subjective. Some lenders could be okay with it as long as you have sufficient reserves. A review of your credit history helps your financial company of choice to come up with a loan agreement that would both serve your interests and theirs.
Debt-to-Income Calculation
Your debt-to-income (DTI) ratio is just as important as your credit score. A lender will weigh on both when considering the ‘big picture’ of your financials. You may have a solid portfolio or pay your bills on time, but these could be immaterial if you’re found to be living on the edge.
A lender examines two types of DTI. The first is called front-end or housing ratio. This determines the percentage of your income that goes toward housing costs. This includes mortgage payments, real estate taxes, and homeowner’s insurance. The second type is the back-end ratio, which shows how much of your income goes to all other financial obligations like credit card bills and child support.
The ideal front-end ratio is 28 percent or less, and the back ratio, with all expenses factored in, should be no more than 36 percent.
Find the Right Lender
Since there are so many different options available with each loan program it’s important that you familiarize yourself with the loan guidelines and requirements that pertain to that specific loan. Choosing the wrong lender or the wrong loan program could end up costing you thousands and paying high-interest rates and large down payments. The more research you do about not only the loan program but also your lender, the better off you will be. Familiarize yourself with the various aspects present within your financial product of choice. Make sure to read all the fine print too. There are some limitations on there that your lender failed or purposefully omitted to mention. Never agree to anything that seems murky to you. See to it that everything has been clearly explained before signing on the dotted line.
Online research could lead you to coming up with three or five prospects. Interviewing multiple lenders is a wise move. This is because it allows you to compare the different kinds of rates, loan programs, repayment structure, interest rates etc. Having plenty of information will help you make more sound decisions. Consequently, you’ll have an easier, less stressful time deciding on who to go with. Don’t be afraid to ask as many questions. In this way, you’ll be able to decide if the lender’s rates and policies are the ones that best fit your needs.
You can start your search right here. Get matched with a lender who will be more than happy to assist you with your home loan and can answer any questions you may have. It takes only a few minutes, it’s quick and easy and best of all it’s free! Simply click the big bright orange button below and fill out the necessary information and within minutes you will be matched with a qualified lender eager to help you with your home loan.