RealFi Offers a Excellent Range Of Non-QM Mortgages
You may earn a comfortable living by unconventional means, such as self-employment. While you might earn a considerable income, it can prove challenging to meet the criteria for a traditional loan.
In the United States, approximately 30% of all Americans are self-employed. Yet more people continue to work traditional jobs while earning part of their income from self-employment.
Often, these individuals turn to non-qualified (non QM) mortgages to access funding. If you’re self-employed, you may find that a non QM loan is the right choice for your needs.
Keep reading to learn more about RealFi’s diverse range of residential non QM mortgages.
What Is a Qualified Mortgage?
An explanation of qualified mortgages makes it easier to understand non-qualified mortgages. Qualified residential mortgages are a relatively new product.
They’re the result of the Dodd-Frank Consumer Protection Act passed by Congress in 2010. In addition to protecting consumers, the act requires mortgage lenders to ensure borrowers can pay back loans.
If a borrower does not meet the criteria for a qualified mortgage, the lender will not approve funding. Instead, however, they may offer the borrower a non-qualified mortgage.
Lenders must assess the ability of a borrower to repay a loan. They use a specific set of criteria to make this determination.
Qualified mortgages meet the terms set forth by the Dodd-Frank Act. For example, potential borrowers must have a specific debt-to-income (DTI) ratio. With a qualified loan, borrowers cannot have a DTI of over 43%.
Furthermore, mortgage lenders cannot offer loan terms with artificially low initial monthly payments. In other words, a lender cannot provide a loan with a low introductory rate that increases sharply once the initial rate expires.
A lender will also assess other borrower background traits according to the Frank-Dodd Act. For example, a lender might review your income and assets. They’ll also examine items such as your credit and employment history to determine your eligibility for a qualified loan.
Understanding Non QM Mortgages
On the other hand, a non QM loan does not follow the guidelines of the Frank-Dodd Consumer Protection Act. If your income varies from month to month, for example, you might consider a non QM loan.
There also other circumstances where an individual might opt for a non QM loan as opposed to a qualified loan. For instance, you may have an erratic income, making a windfall some months and earning nothing at all during other months.
With this kind of financial background, it’s challenging to meet the requirements of the Frank-Dodd act for a qualified mortgage. Resultantly, a lender might offer you a loan product with different terms.
A non QM loan is indeed different from a qualified loan. However, that doesn’t mean that a lender won’t assess your ability to make your loan payments. In short, a non QM loan product is simply an alternative solution for individuals who don’t meet the criteria for a qualified loan.
Overcoming Borrowing Challenges With Non QM Loans
It can prove challenging to figure out how to qualify for a loan under some circumstances. For example, you may have limited financial documentation.
Alternatively, you may have a debt-to-income ratio of more than 43%. Nevertheless, it’s important to understand that a non QM loan from a reputable lender is still a quality product.
With a qualified loan, a lender has followed guidelines to ensure that a borrower can repay a loan. In the event of future litigation, a borrower cannot claim that their ability to pay was not verified by the lender.
Still, the Frank-Dodd Act provides protections in favor of consumers. If a borrower believes that the lender did not assess their ability to repay properly, they can still challenge the lender in court.
Finally, you can only purchase mortgage insurance for a qualified loan. For example, FHA, VA, Fannie Mae and Freddie Mac loans are all qualified loan products that require insurance.
Insured residential mortgages are safer for investors.
What Is the Difference Between Non-QM and QM?
Now that you have a better understanding of non QM loans, you might wonder more about the difference between qualified and non QM mortgages.
In short, a lender will use most of the same criteria used to assess a borrower’s ability to pay a qualified loan. However, lenders that specialize in non QM loans offer more flexibility when providing this kind of loan product.
Still, non QM borrowers have a lot in common with individuals who secure qualified loans. As an example, the average credit score of a non QM borrower is around 700. Meanwhile, most qualified mortgage borrowers have a credit score of 754.
Also, the typical loan-to-value-ratio for non QM borrowers is around 70%. Meanwhile, qualified mortgage borrowers typically maintain a loan-to-value-ratio of about 80%.
Here, however, is where the difference between non QM and qualified loan borrowers starts to emerge. Non QM borrowers typically have a higher debt to income ratio compared to qualified mortgage holders.
Who Offers Non-QM?
Lenders such as RealFi Funding specialize in providing non QM mortgages. This loan product helps borrowers who may have credit issues.
For example, a borrower may have had a past foreclosure or bankruptcy. Alternatively, a borrower may have a record of late payments or limited credit issues.
Non-QM loans are vital for making homeownership possible for these individuals. Again, non-qualified mortgages do not comply with federal standards.
Resultantly, non QM loans have different terms allowing mortgage lenders to accept alternative income documentation. In this way, lenders can help borrowers qualify for a mortgage.
Non QM lenders follow a different set of lending guidelines. Under these guidelines, mortgage lenders take a more comprehensive look at a potential borrower’s financial background. In other words, a lender will look beyond a borrower’s credit score and strict government guidelines.
A non QM lender will still assess a potential borrower’s income and employment. However, they’ll evaluate a borrower’s ability to repay a mortgage based on many other factors.
Diverse Loans for Various Needs
There are many kinds of people that might opt for a non-qualified mortgage. For example, self-employed individuals often secure funding to purchase a home with a non QM product.
Usually, self-employed individuals have a more complex income structure. Also, self-employment income typically does not fit into the one-size-fits-all framework of qualified mortgage standards. For this reason, lenders need to use different calculations to assess a potential borrower’s ability to pay.
First-time borrowers might also consider a non-qualified mortgage. For example, some people might find it challenging to obtain their first mortgage. In this instance, a non QM loan is a viable option.
Again, you may consider a non QM mortgage loan if you’re self-employed. You may also consider this kind of loan product if you’re a real estate investor.
In addition, retirees who want to purchase a second home might consider a non QM mortgage. Likewise, if you’re seeking interest-only payments or more flexible debt-service ratio requirements, you may consider applying for a non QM loan.
The RealFi Non QM Loan Difference
RealFi lending officers understand that purchasing a property is often complex. What’s more, it can prove time-consuming.
However, we work to improve the lending experience in every way at RealFi Funding. For example, we start the borrowing process by running new loan applicant information through our automated system. In this way, we can verify whether you meet the criteria for a qualified mortgage quickly.
We understand that it can prove frustrating when borrowers fail to meet the criteria for a qualified mortgage. Accordingly, we provide our borrowers with an alternative.
You may have had a relatively recent negative credit event, such as a bankruptcy, short sale or foreclosure. If so, you may find that a non QM loan is a viable solution for resuming homeownership.
The RealFi Funding management team is a diverse mix of legal, financial, real estate and investment professionals. We’ll evaluate both the positive and negative aspects of your financial background.
At RealFi, we are redefining the mortgage process. We take advantage of state-of-the-art technology and in-house expertise to meet the needs of our clients. Most importantly, we’ll work tirelessly to provide you with a customized financing solution.
Secure the Funds for Your Next Home by Partnering With RealFi
Now you know more about RealFi’s diverse range of residential non QM mortgages. If you’re ready to partner with a lender that you can trust, RealFi Funding is here to meet your needs.
RealFi Funding is a leader in the mortgage industry. We’re a technology-driven company that specializes in alternative investment management. Furthermore, we’re experts in real estate credit strategy.
We’ve revolutionized the lending process from the ground up. At RealFi, we combine an innovative lending process with a wealth of financial knowledge. More importantly, we provide a seamless, transparent lending experience.
When you trust us with your borrowing needs, we provide you with more than a mortgage loan. A partnership with us is the beginning of meeting all your borrowing needs now—and in the future.
Please feel free to contact a RealFi Funding lending specialist at (800) 601-1917 or connect with us online to learn more about meeting your present and future borrowing needs.