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How to Identify Non-QM Borrowers and Match Them with the Right Loans: A Guide for Mortgage Brokers

September 19, 2023
by Chris Teague
Sept. 20, 2020
Last updated: September 19, 2023

The information on this page is provided for the benefit of mortgage professionals and not intended for consumers or the general public.

In the ever-evolving mortgage industry, non-qualified mortgage (non-QM) loans have gained popularity as a viable solution for borrowers who do not meet traditional lending criteria. As a mortgage broker, identifying non-QM borrowers and effectively matching them with the right loan products is essential for meeting their unique financing needs. In this article, we will explore key strategies and considerations to help mortgage brokers identify non-QM borrowers and guide them towards suitable loan options.

  1. Understanding Non-QM Borrowers: Non-QM borrowers are individuals who may not fit the standard criteria of qualified mortgages. They may have unconventional income sources, limited documentation, non-traditional credit histories, or unique financial circumstances. These borrowers often require more flexible underwriting guidelines and loan options that can accommodate their specific needs.
  2. Identifying Non-QM Borrowers: To identify potential non-QM borrowers, mortgage brokers can employ various strategies:
    • Comprehensive Pre-Qualification Process: Conduct a thorough pre-qualification process that includes evaluating income sources, employment history, credit profiles, and financial documentation. Look for red flags such as self-employment, complex income structures, high debt-to-income ratios, or unique property types that may indicate a non-QM borrower.
    • Client Consultations: Engage in detailed consultations with clients to   understand their financial goals, unique circumstances, and any challenges they may face in meeting traditional lending criteria. Listen attentively to their needs and ask targeted questions to identify potential non-QM scenarios.
    • Network and Referrals: Collaborate with real estate agents, financial advisors, accountants, and other professionals who work closely with clients that may require non-QM loans. These individuals can provide valuable referrals and insights into potential non-QM borrowers.
    • Marketing Efforts: Develop marketing materials and campaigns that specifically target non-QM borrowers. Highlight the benefits of non-QM loans, such as flexible underwriting, unique income verification options, and tailored solutions for self-employed or credit-challenged borrowers.
  3. Matching Non-QM Borrowers with the Right Loans: Once you have identified non-QM borrowers, it’s essential to match them with the most suitable non-QM loan products. Consider the following factors:
    • Income Verification Options: Non-QM loans offer alternative income verification methods, such as written VOE only, 12-month profit & loss statement, bank statements, and asset depletion. Evaluate the borrower’s income sources and select loan products that align with their specific situation.
    • Credit History Considerations: Non-QM loans may be more forgiving when it comes to credit history. Evaluate the borrower’s credit profile and identify loan products that are compatible with their creditworthiness.
    • Property Types: Some non-QM loans are designed for unique property types, such as investment properties, non-warrantable condominiums, or mixed-use properties. Assess the borrower’s property type and select loan options that cater to their specific needs.
    • Loan Terms and Rates: Non-QM loans offer a variety of terms and rates. Consider the borrower’s financial goals, repayment capabilities, and risk tolerance to determine the most suitable loan terms and rates.
  4. Building Relationships with Non-QM Lenders: Develop strong relationships with non-QM lenders who specialize in providing financing solutions for non-QM borrowers. Stay informed about their loan products, underwriting guidelines, and documentation requirements. Collaborating with these lenders ensures access to a range of non-QM loan options and enhances your ability to match borrowers with the right loans.
  5. Effective Communication and Consultation: Clear and effective communication is vital when working with non-QM borrowers. Take the time to understand their financial goals, discuss their options, and explain the benefits and considerations of non-QM loans. Educate borrowers about the requirements, qualifications, and potential loan terms associated with non-QM loans. Providing guidance and acting as a trusted advisor will empower borrowers to make informed decisions.
  6. Staying Informed about Non-QM Loan Programs: The non-QM lending landscape is continually evolving. Stay updated on the latest non-QM loan programs, industry trends, and regulatory changes. Attend industry conferences, participate in webinars, and engage in professional development activities to enhance your knowledge. By staying informed, you can better serve your clients and match them with the most appropriate non-QM loan products.

Remember to conduct thorough pre-qualification processes, engage in detailed client consultations, nurture professional networks, and implement targeted marketing efforts to identify potential non-QM borrowers. Once identified, carefully consider income verification options, credit history, property types, loan terms, and rates to match borrowers with the most suitable non-QM loan products.

Quontic Wholesale understands the importance of catering to borrowers’ unique situations, which is why we offer a wide range of loan programs specifically tailored to non-QM borrowers. By effectively identifying these borrowers and matching them with the right loans, mortgage brokers play a pivotal role in helping individuals achieve their homeownership goals and meet their unique financial needs. We encourage brokers to embrace the opportunities within the non-QM lending space, stay informed about industry trends, and continually enhance their expertise. By doing so, they can provide exceptional service to non-QM borrowers in an ever-evolving mortgage landscape. Partner with Quontic Wholesale to access our comprehensive suite of loan programs and receive the support you need to excel in the non-QM lending market.

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