A non-qualified mortgage (non-QM) is a type of home loan that is designed to help home buyers who cannot meet the strict criteria of a traditional (or QM) mortgage. For instance, if you are self-employed or do not have all the necessary documentation to qualify for a traditional mortgage, you might need to look at non-qualified mortgages.
To qualify for a traditional/QM mortgage, you must meet certain requirements such as having verifiable income, including pay stubs, W-2s, and tax returns, and having a debt-to-income ratio (DTI) of 43% or less. However, if you cannot meet these requirements, you may need to consider a non-QM mortgage.
Non-qualified mortgages use non-traditional methods of income verification to help a borrower get approved for a home loan. For example, business bank statements can be used to document strong cash low. These types of loans are for borrowers with unique income qualifying circumstances.
If you are considering a non-qualified mortgage, it is important to weigh the pros and cons. While non-qualified mortgages can be easier to obtain than traditional mortgages, they often come with higher interest rates and fees. It is important to do your research and compare different lenders before making a decision.
Examples of some Non-QM products:
- flexible credit guidelines
- 40 year term loans
- interest only loans
- bank statement loans
- closed end 2nd mortgages
- 1 year self employment is OK
- 1 or 2 year interest rate buy-downs
- more flexible seasoning requirements
- foreign national: No Credit Score, Ref Letters, or Visa Required
- mixed Use/5-8 Apartment Buildings are OK
- non-warrantable condos are OK
- reserves can come from cash out