What is a Non QM Loan?
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We’re here to help you understand what a Non-QM loan is and how it might fit into your mortgage plans.
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What is a Non QM Loan?
A non-QM loan is a loan that does not meet the standards of a qualified mortgage. A qualified mortgage is a loan that is insured or guaranteed by the government, such as through the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), or that meets certain standards set forth by the Consumer Financial Protection Bureau (CFPB).
A non-QM loan may still be a good option for you if you do not meet the standards of a qualified mortgage. For example, if you have a higher debt-to-income ratio, or if you have a history of bankruptcy or foreclosure, you may still be able to get a non-QM loan.
The Benefits of a Non QM Loan
A Non QM loan is a mortgage that does not meet the guidelines established by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. These guidelines are also known as the qualified mortgage (QM) rules.
The main benefit of a Non QM loan is that it allows borrowers to qualify for a mortgage who would not otherwise be eligible under the QM rules. This includes borrowers with higher debt-to-income ratios, self-employed borrowers, and borrowers with non-traditional credit histories.
Non QM loans can also offer more flexible terms than traditional loans, such as interest-only payments or longer loan terms. This can make them more affordable for borrowers who may otherwise struggle to get approved for a mortgage.
If you are interested in learning more about Non QM loans, we recommend talking to a mortgage lender to see if you might be eligible.
The Risks of a Non QM Loan
A non QM loan is a mortgage that does not meet the standards set by the government-sponsored enterprises Fannie Mae and Freddie Mac. These loans are often referred to as “non-qualifying” or “non-conforming” loans.
Non QM loans can be riskier for lenders because they are not backed by these government-sponsored enterprises. This means that if the borrower defaults on the loan, the lender may not be able to sell the loan to Fannie Mae or Freddie Mac, and may instead have to keep the loan on their own books.
Non QM loans can also be more expensive for borrowers. This is because lenders often charge higher interest rates and fees on these loans, to offset the increased risk.
If you are considering a non QM loan, it is important to understand the risks involved. Be sure to shop around and compare rates and fees from multiple lenders before you decide on a loan.
How to Qualify for a Non QM Loan
There are a few ways to qualify for a non QM loan. The first is to have a high credit score. The second is to have a low debt-to-income ratio. And the third is to have a steady income.
If you have a high credit score, you’ll likely qualify for a non QM loan with ease. Lenders will be more willing to work with you if they know you’re a responsible borrower.
If you have a low debt-to-income ratio, that means you don’t have much debt compared to your income. This is an attractive quality for lenders because it shows that you’re manage your money well.
And finally, if you have a steady income, that’s another plus for lenders. They like to see that you have a consistent source of income so they know you’ll be able to make your loan payments on time.
