Non-qualified Mortgage Loans or “Non-QM” Loans may sound odd, but they’re a perfectly viable financial product for an investor to use. Consumer Financial Protection Bureau (CFPB) sets the guidelines for “qualifying” mortgage. Non-qualified Mortgages do not follow the strict standards set by the CFPB. There are some great non-qualified mortgage options on the market for real estate investors—learn more from Professional Mortgage Solutions in Rego Park, NY.
Details on Qualified Mortgages
There are certain criteria the government has created to help monitor the mortgage industry after the mortgage crisis. These criteria include the standards for a qualified mortgage. Some of the rules require the following:
- Lenders must set a maximum loan term of less than 30 years;
- Any fees for the loan must be less than 3% of the total loan amount;
- The loans cannot be interest-only or include negative amortization. Therefore, some balloon interest-rate loans are not permitted; however, many can qualify if they adjust to certain standards and regulations.
Details on Non-Qualified Mortgages
A loan is non-qualified if it does not meet above standards, among other things. For example, a non-qualified mortgage may accept a debt-to-income ratio of greater than 43%. This is great news for investors! Since they are considered higher risk, the government will not back non-QM loans. However, if it meets requirements like the FHA, VA or USDA Loans, then it may be a lower risk option.
Investors would do well to be mindful of their asset size and mortgage quantities in this regulated market. The size of the lender’s assets also affects the rules around qualified versus non-qualified mortgages. A high number of mortgages and assets may mean that you will have to start taking on more non-QM loans to continue buying. Your ability to repay the loan and your debts will be carefully reviewed in the application process. You may want to aim to have less than 500 mortgages.
Non-QM loans can either be conforming or non-conforming. Nonconforming loans, also called “jumbo loans,” are mortgages that exceed the limit in a given county and stay on lenders’ own books as portfolio loans.
Non-QM Loans are Great for Real Estate Investors and All Types of Borrowers
Loads of real estate investors use non-QM loans. However, even if you are not a large investor, you may be self-employed and desire to buy a home that will not qualify for a government-backed program. The non-QM approval process can be beneficial for business owners and entrepreneurs. The approval process can also be quite fast, which many sellers will appreciate. You can avoid the painstaking review of detailed tax statements and employment verifications. Nickel City Funding Inc. welcomes you to contact us in our Rego Park, NY offices regardless of the type of loan you seek. We are thrilled to link you with information on investment properties in the area. We look forward to helping you better understand non-qualified mortgages.