Residential Non-QM

Non-Qualified Mortgage loan

Non-Qualifying loans

Non-Qualified Mortgage loan or Non-Qualifying loans (Non-QM) help borrowers who have certain credit issues, such as foreclosures, bankruptcy, late payments or other isolated credit issues.  Non-QM plays an important role in helping make the dream of owning a home possible to more people. These are loans that do not meet the federal standards and have different terms which allows Non-QM lenders to accept alternative income documentation to qualify borrowers for their mortgage.  

A Non-QM loan has underwriting guidelines that are different than the typical conventional or government type loans. These guidelines allow us to look at the entire loan picture for a borrower and not just their credit score and government underwriting matrices. The Non-QM loans lending guidelines also look at the borrower’s income based on their type of employment and analyze their Ability to Repay (ATR) a loan according to its terms (based on many factors). This includes cash flows through personal and business bank accounts.

Self-employed

Self-employed borrowers typically have more complicated income structures that require different calculations than wage earners. This type of income often times does not qualify under the “one size fits all” conventional/government underwriting standards.

first-time borrowers

Since many first-time borrowers are only aware of conventional, qualified loans, it can seem like becoming a first-time buyer is an impossible feat. However, that isn’t the case. Non-QM loans are a credible and viable option for many borrowers. Furthermore, while Non-QM mortgages are not held to the same restrictions as conventional mortgages, it does not mean that borrowers are putting themselves in a risky position. There are checks and balances in place to protect both the buyer and the lender. Every loan, including Non-QM, remains subject to the Ability-to-Repay rule; Non-QM loans just have a different way of getting there.

Who Should Consider a Non-QM Mortgage?

Purchasing property is already a complex and often drawn-out process. At RealFi, all applicants are first run through an automated system to ensure they don’t already qualify for an agency loan (through Fannie Mae or Freddie Mac) or a government-insured loan.  If you’re then ineligible for a traditional mortgage, the situation quickly becomes frustrating. However, conventional qualified loans are not your only option. If you have been denied for a traditional loan, a Non-QM loan may be your next step. You might also want to consider a Non-QM loan if you have good reason to believe you will not qualify for a conventional loan solely based on your credit, income, or other factors. For those who are still unsure whether this might be the right financing solution, let’s further break down the most common types of Non-QM loan borrowers.

Non-QM mortgages are typically recommended for:

  • Self-employed individuals
  • Real estate investors
  • Retirees interested in purchasing a second home that will not be their primary residence
  • Small to midsize business owners
  • “Subprime” or “Non-Prime” borrowers who just barely miss the requirements for a conventional loan and don’t want to postpone
  • Those who have had a recent credit event (bankruptcy, short sale, or foreclosure)
  • Foreign Nationals

If you fall into one of these categories, you should consult one of our loan offices who can help you determine if a Non-QM mortgage is the right solution for you.