Non-Qualified Loan

Which Non-QM Loan Product is Best for You

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Which Non-QM Loan Product is Best for You

There are a variety of Non-QM loan products present in the market. Depending on the borrower’s needs and current situation, one product may help you get the needed financing.

Here are some of the loan products under the Non-Qm territory.

“Beyond-30” Mortgage Loans

This is primarily because of how Qualified Mortgage loans are defined. The regulatory reforms do not allow loan terms that go beyond 30 years. However, there are many consumers looking for a loan with a term stretching as far as 40 years.

If you total the payments in the span of 40 years, you may realize that you are paying a huge interest. Although this is such a long stretch, loans of such kind are still available in the market because they make very low monthly payments possible.

Stated Income Loans

Declare your income and they’ll take your word for it. It’s the basic premise of Stated Income Loans. However, it does not necessarily mean though that you do not provide any document to show your income.

In the QM world, your income has to be fully documented. There is a standard verification and underwriting procedure that needs to be done. Many Americans cannot provide all these papers, and so they won’t be eligible for a QM loan. If this is the case, a stated income loan will work best for them.

Do you have questions? Ask a lender about it.»

Negative Amortization Loans

Amortization is defined as paying off the loan interest and principal through regular payments. Negative amortization is when you do minimum payments that do not pay off the interest. In the end, this interest will continue to add up.

The unpaid interest will be added to your principal. On the next month, the interest rate will then apply not only to your principal but to the unpaid interest as well.

Although this is not a popular choice for many, there is still a market for this kind of loan.

Jumbo Loans

There are individuals who need extremely large financing. Conforming loans have limits to the amount a borrower can borrow. But because there are some who need and can very well afford to pay such a large amount, jumbo loans are originated by lenders.

It is designed to provide financing for high luxury properties. Because jumbo loans exceed conforming loan limits, they cannot be purchased, securitized or guaranteed by Freddie Mac or Fannie Mae. And because of the huge money involved, there are special underwriting procedures and requirements. Tax implications are also different for this loan product.

Interest-Only Loans

One of the most popular Non-QMs is the Interest-Only loan. Simply put, you pay only the interest in the given term which is usually 4 to 7 years. After this term, you will start paying the principal.

The borrower can then choose to pay off the principal, pay a lump sum, or refinance the loan.

There are many loan products under the Non-Qualified Mortgage bandwagon. What is important is to study your situation and your repayment ability and find the right product for you. Speaking with a lender will help make the search faster.

Non-QM loans are available, Click Here»

A Roundup of Mortgages for Today’s Self-Employed

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It’s not that they don’t have adequate income/assets to take on a mortgage. It’s just that self-employed borrowers can’t show in pay stubs, Form W2s, and sometimes tax returns their ability to repay their loans. There are a number of mortgages that are made for or admit the self-employed professionals of today. Here’s a non-definitive list of loans starting from those requiring no income verification.

What mortgage are you looking for?»

Option 1: No Income Verification Loans

Also known as no doc and stated income loans, these mortgages are underwritten based on your credit score, employment history, and down payment. Credit scores required can be in the 700 range and equity at 40%.

Lenders will verify your self-employment and in lieu of W2s and pay stubs, your personal and business bank statements good for a year. These bank statements should match your income statements.

With the financial regulatory reform of recent years, stated income loans are not the liar loans of the past. Their documentation may not be full but lenders compensate it with other factors as mentioned above.

Option 2: Bank Statement Loans

These loans are akin to stated income loans, requiring a 12-month history of individual and/or business bank statements. LTV can be between 75% and 80% as it varies per lender.

Typical requirements are business license and related permits, tax returns and tax return transcripts. There may be other requirements that depend on, among other things, the length of your self-employment history, e.g. two years or less.

We can help you find a mortgage.»

Option 3: Conventional Loans

While loans sold to GSEs Fannie Mae and Freddie Mac require full documentation (they still do), they have loosened up their guidelines for the self-employed.

For Fannie Mae’s part, a self-employed borrower’s income can be verified using his/her individual or business tax returns or both for the past two years, as applicable. The self-employed borrower, which is defined by Fannie as “ any individual who has a 25% or greater ownership interest in a business,” will need to show two years’ worth of prior income as proof that this source of earnings will likely continue. Those who have been self-employed recently may provide their latest federal tax returns.

Back in September, Freddie Mac introduced a pilot program for first-time homebuyers with low income and alternate income sources like self-employed professionals.

Option 4: FHA Loans

Two years seems to be the “magic” number for mortgages for the self-employed as FHA loans also require that you should have a steady flow of self-employment income for the last two years. This will be shown by duly signed and dated tax returns and schedules for the past two years. Income statements and balance sheets are also required.

Take note that the FHA requires full documentation but the perks can be worth it. For one, your down payment could be as low as 3.5% depending on your credit score.

These are just some options that you can look into when shopping for mortgages. Lenders may offer you other options, talk to one today!»

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.

Need financing for investment properties? We can help.

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.

Find a Non-QM lender near your area today.