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.
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.
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.
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.