What is a NON-QM Loan? – Suburban Snacks Episode 97
Hello everybody, welcome back to Suburban Snacks. I’m Cristy Olof and this month’s snack is POP ROCKS. Before we review the snack, we will be informing you on what a Non-QM Loan is. A Non-QM loan is a non qualified mortgage loan and is a type of home loan that does not meet the standards set by the Consumer Financial Protection Bureau’s (CFPB) Qualified Mortgage (QM) rule.
The QM rule was designed to establish lending criteria to ensure borrowers could reasonably afford their mortgage loans and to protect lenders from legal liabilities associated with risky lending practices. Unlike qualified mortgages, non-QM loans cater to borrowers who may not fit the traditional lending standards but can demonstrate their ability to repay the loan. These loans are designed to provide more flexibility for both lenders and borrowers, but they typically come with higher interest rates and fees to compensate for the increased risk. So what do lenders look at for a non-QM loan? The Lenders typically determine if you meet the requirements by looking at documents such as W-2s, Bank statements, Pay stubs and Tax returns. However lenders may also accept alternative income documentation outside of the typical terms. Another benefit is some non-QM loans come with loan periods that exceed 30 years. This keeps you locked into a mortgage for a longer period and can also increase the total amount you pay for your home. You can also meet the requirements for a non-QM loan even if your credit score is fair or even poor. Most non-QM loans are available for borrowers with a credit score of 620, while some non-QM programs open the door to borrowers with credit scores as low as 580 or even 500. The last benefit is for borrowers’ debt to income ratio.
For a traditional loan, your lender will typically expect you to have a debt-to-income ratio of 43% or lower. But non-QM loans are available even to those whose debt-to-income ratio is 50% or above — providing loan options to those whose debts might otherwise disqualify them from homeownership. In conclusion, if you are not qualified for a traditional loan, you may still be able to purchase your dream home by using a non-QM loan.So if you are someone looking to purchase or sell a home in Southern Arizona, then we at Suburban would love to help!
Now it’s time for the snack review. Do you like POP ROCKS? Let us know in the comments below. That’s going to do it for us here at Suburban Snacks. If you have any questions or would like to get into contact with us feel free to check out our website at suburbanrealestategroup.com. Thanks for watching, my name is Cristy Olof and we will see you in the next one!