What is a Non-QM Loan?

Hello, I’m Eric Peterson, secondary marketing manager at Lend Smart Mortgage. And today, we’re here for another episode of Mortgage Q and A. Today we’re going to talk about what is a Non-QM Loan, which stands for a non-qualified mortgage. The CFPB, which stands for the Consumer Finance Protection Bureau, has set forth some guidelines about what a qualified mortgage is.

What is are some characteristics of a Non-Qualified Mortgage

Some parameters for a qualified mortgage are less risky loan characteristics, such as no interest-only mortgages, no mortgages that have a prepayment penalty, and no mortgages that have negative amortization, which means when you make your payment, your balance of your mortgage increases each month.

Who could benefit from a Non-QM Loan

So for a non-qualified mortgage, these are mortgages that maybe sit just outside the box of a normal mortgage. Perhaps you are self-employed, and your tax returns don’t have quite enough income to qualify for a mortgage. There are some loans on the non-qualified mortgage side that you can qualify using your bank statements, so your monthly deposits for your business. Or perhaps you want to buy an investment property, and you’d like to qualify using just your lease income for that particular property in a non-qualified loan space. We have some options for that.

Non-QM Loans for Bankruptcy and Foreclosures

Another reason you might be interested in a non-qualified mortgage is that they have different parameters on your bankruptcy seasoning. Or perhaps you had a foreclosure in your recent past. If you’ve had a foreclosure in even the last year on a non-qualified mortgage loan, we could get you a loan right away instead of having to wait seven years as you would on a conventional mortgage.

Non-QM Loans for Larger Loans

One more reason we do non-qualified mortgages. Perhaps you’re looking for a larger loan size, something in the jumbo category, which would be a loan that is over $510,400 (647,200 in 2022). That’s the amount Fannie Mae and Freddie Mac set forth for the conventional loan limits. Those loans are a little bit harder to qualify for. On what would be considered the A-paper side, there’s a little more expanded guidelines on the non-qualified loan area. For loans that are in the larger range, say five, six, seven, hundred thousand.As always, if you have any questions on these and any other mortgage topics, contact one of our mortgage professionals at the number on the screen.

And as always, be smart. Choose Lend Smart.

All information is provided for informational purposes only. Please consult with a Loan Officer for qualification requirements. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Lend Smart Mortgage NMLS #4474 | AZ BK # 0908384