Non-QM
In some cases, potential homeowners struggle to meet the qualifications of a standard mortgage. If you are self-employed or lack the documentation required to obtain a standard mortgage, a non-qualified (non-QM) mortgage could be a better option.
A traditional (qualified) mortgage requires several criteria. These include
Verifiable income documentation, including your W2s, tax returns, pay stubs, or other types of documents.
A debt-to-income ratio of 43% or less, which proves that after all your monthly expenses, you can still afford to make a mortgage payment.
A 3% limit on points and fees on your loan, which simply means that you cannot pay more than 3% of your loan amount in fees.
A lack of loan features that are considered “risky,” which may include things like interest-only payments, balloon payments, or a term that exceeds 30 years.
These qualifications exist for two reasons. First, they help reduce the lenders’ risk by ensuring that you can repay your mortgage without defaulting or going into foreclosure. Second, they protect you – the buyer – from any kind of unfair terms that an unscrupulous lender may include in your loan agreement.
These qualifications exist for two reasons. First, they help reduce the lenders’ risk by ensuring that you can repay your mortgage without defaulting or going into foreclosure. Second, they protect you – the buyer – from any kind of unfair terms that an unscrupulous lender may include in your loan agreement.
The benefits of a non-QM are many. They can allow you to qualify for a home loan with a low credit score and less stringent documentation requirements despite an application process that is almost identical to a conventional mortgage.
However, it’s important to consider the potential drawbacks, which can sometimes include low availability, higher fees and interest rates, and an inability to sell the loan to Fannie Mae or Freddie Mac.
Who Should Consider a
Non-Qualifying Mortgage?
Simply put, if you have the income you need to make a mortgage payment regularly, but you cannot qualify for a conventional mortgage due to a lack of documentation or a low credit score, a non-qualifying mortgage is a great option. If you can show that you can make your payments on time, you may be able to qualify for most potential homeowners, the most difficult part of the process involves finding a non-QM lender.
Here at EZ Lending Solution, it is our mission to help all our clients buy the homes they want and deserve. We offer non-qualifying mortgages (as well as several other products) that are designed to help you achieve your dreams of homeownership regardless of your unique employment, credit, or documentation situation.