Whether you have clients who are experienced real estate investors or are new and want to dip their toe into the pool of buying a small multi-family home as an investment, chances are you’ve been asked about non-QM loans. Or perhaps you haven’t been asked about it but have come across a borrower with strong financials but not the documents to qualify for a conventional loan.
With conventional borrower and refinance volume in decline, you may be seeing a proliferation of new buyers who are not qualified for conventional loans. That doesn’t mean it can’t be a time of opportunity and even growth with your non-conventional borrowers.
First, a few of the basics:
Non-QM stands for non-qualified mortgage loan.
It’s not an entirely accurate label, since it can bring to mind borrowers who don’t qualify to buy, meaning those who are going to get underwater quickly with a mortgage they can’t afford. That’s not what non-QM is about. Non-QM simply means loans, often for private investors (although they can also be for individual home buyers) that don’t conform to strict government requirements for loans or conventional mortgage guidelines.
Who are non-QM loans for?
The non-QM loan approval process involves looking at an applicant’s financial health and assessing their ability to repay. This can be done in ways that wouldn’t fly with a conventional mortgage, like with accountant-prepared P&L statements.
Non-QM loans can make it possible for non-traditional income earners to qualify for mortgage loans. While the lender may still assess your financial profile, such as income and DTI, they may still be able to qualify for a non-QM loan whose structure and/or requirements don’t quite meet the standards set out by the government.
Non-QM loans can be especially helpful for borrowers who:
- Need to move quickly on an investment property opportunity
- Have higher DTI ratios, but can still afford to pay a mortgage
- Don’t have the specific documentation required by most traditional mortgage lenders, such as regular W2s or two years’ tax returns.
- Borrowers looking for interest-only mortgage loans, which can be useful for those looking to quickly flip a house or otherwise don’t plan to keep the property for a long period of time.
- Immigrants or foreign nationals. Conventional mortgage loans require a U.S. social security number, but non-QM loans may not. If you’ve got foreign nationals in the states looking to invest, a non-QM loan may be the way to go.
Why you should bring your non-QM borrowers to Quontic:
As a CDFI, we are uniquely positioned to help non-traditional borrowers achieve their goals of home ownership and property investment, offering mortgage products that don’t require traditional documentation like W2s. A borrower still needs to have a good down payment and the financial health to show ability to repay, but they can show this ability in different ways.
Whether you’ve got clients that are experienced investors or first-time buyers, we have mortgage solutions that may put their goals within reach.
Contact us today to learn more.
This information is provided for the benefit of Mortgage Professionals and not intended for Consumers or the general public.
All lending products are subject to credit & property approval. Rates, program terms & conditions are subject to change without notice. Not all products are available in all states or for all amounts. Other restrictions & limitations apply. Information is accurate as of the date listed below and may change without notice.
September 19, 2022
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