Non-QM Loans

Most Common Non-QM Loan Questions

• What is a Non-QM Loan?

A Non-QM (Non-Qualified Mortgage) Loan is a type of mortgage that does not meet the standards set by government agencies such as Fannie Mae and Freddie Mac or conform to the Consumer Financial Protection Bureau's (CFPB) to be called a QM (Qualified Mortgage) Loan. Unlike traditional QM Loans, which have strict criteria regarding a borrower's credit history, debt-to-income ratio, and other factors, Non-QM Loans can be more flexible in their income and underwriting criteria.

 

• Who qualifies for a Non-QM Loan?

Non-QM Loans are designed for borrowers who may not meet the stringent requirements of traditional qualified mortgages. This can include self-employed individuals, business owners, those who receive irregular income, or those with unique financial and credit situations.

 

• What Are the Key Differences Between QM and Non-QM Loans?

Qualified Mortgages follow strict guidelines set by government agencies, while non-QM Loans have more flexibility in underwriting criteria. Non-QM Loans may accommodate borrowers with non-traditional income sources and/or higher debt-to-income ratios.

 

• Do Non-QM Loans have higher interest rates?

Non-QM Loans often come with higher interest rates when compared to traditional qualified mortgages, primarily due to the elevated risk associated with these loans. However, it's important to note that borrowers may have the opportunity to mitigate this risk and potentially secure a more favorable interest rate by leveraging compensating factors; a larger down payment, excellent credit scores, reserves (amount of assets available after closing) & etc.

 

• Do Non-QM loans have additional fees and/or costs?

Yes, typically Non-QM Loans have additional fees and costs associated with them. The specific fees and costs associated with Non-QM Loans can vary among lenders and may also include a pre-payment penalty. However, a borrower may have the opportunity to reduce these additional costs with the same compensating factors previously mentioned.

 

• How do you know if a Non-QM loan is the best loan for me?

Everyone’s financial situation can be different due to numerous factors. These factors can determine and sometimes dictate the need for a Non-QM Loan. A Non-QM Loan can be a great loan, but to ensure you choose the loan that is right for you, it is important to speak with a mortgage professional to discuss your specific situation in detail. Contact me to begin this conversation.