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In the mortgage world, there are “Qualified,” and Non-Qualified mortgage programs.
Qualified mortgages are what consumers would think of as a normal, plain-vanilla loan. For instance, 15- or 30-year mortgages with a fixed rate. Lenders follow strict regulations about credit-history, debt-to-income ratio, and income stability, along with other metrics that predict how risky it is to loan money to you.
For a growing segment of the population, traditional qualified mortgages don’t work for them.
If that’s your case, let’s explore the possibility of a non-qualified mortgage or “Non-QM.”
Many borrowers’ circumstances fall outside the definition of a qualified mortgage, but they still have the proven ability to make mortgage payments on time. This is who Non-QM loans are designed for.
Non-QM loans come in all shapes and sizes. There are almost as many styles of Non-QM mortgages as there are non-traditional situations.
In this scenario, you’re a freelance bookkeeper doing contract work for a variety of clients. However, you got in over your head with credit card debt and delinquent payments. This has caused a significant drop in your credit score. Although you can afford to make mortgage payments, traditional lenders will turn you down due to the low score. However, a Non-QM loan is the perfect opportunity
for your specific need.
They’re great loans.
Non-QM loans may have a higher interest rate than a conventional mortgage. How much higher varies depending on the situation. Obviously, loans that carry more risk for the lender are going to have higher fees and interest rates. That being said, many Non-QM loans are very competitively priced. In other words, this is a golden opportunity for you to qualify for a purchase or refi loan that would not have been otherwise possible. Non-QM loans are made only to people who have an income track record to prove they can handle a mortgage payment.
Non-QM loans are definitely flexible outside-the-box lending.
