Non-Qualified Mortgages Offer a Nontraditional Solution to Homeownership

There are multiple reasons a person may be financially ready to own a home but struggles to qualify. This often involves having an inconsistent or nontraditional income structure, a major credit event or high debt. For this reason, there are non-qualified mortgages to help those who wouldn’t typically meet the necessary requirements. Non-QM loans have their own unique set of criteria, which includes flexible income and credit requirements. In exchange for these adjustments, homebuyers may need to make larger down payments and pay higher interest rates.

A Non-QM loan is a home financing solution for responsible borrowers with unique financial circumstances. It is a flexible home loan covering a variety of consumer needs, as well as an option for those who have recently experienced bankruptcy or foreclosure. A Non-QM loan is available to foreign nationals and may be available for multiple properties. A Non-QM loan helps fill the gap for homebuyers who don’t have the income proof they need to qualify traditionally.

There are a few key differences between qualified and non-qualified mortgages. A qualified mortgage adheres to certain standards set by the Consumer Financial Protection Bureau (CFPB). These standards ensure that the borrower can afford the loan. Qualified mortgages also have loan terms not exceeding 30 years. They also require verification of your income and assets.

When it comes to qualified mortgages, lenders must determine whether a borrower can really afford a loan before providing any financing by verifying and documenting parts of the borrower’s personal finances. The “ability-to-repay” rule requires a lender to evaluate loan applications based on these eight components:

• Current income/assets
• Current employment status
• Monthly payment for the loan
• Monthly payment on any simultaneous loan secured by the home
• Monthly payment for mortgage-related obligations
• Current debt, alimony and child support
• Monthly debt-to-income ratio or residual income
• Credit history

The process of verifying income for non-qualified mortgages utilizes manual underwriting, allowing borrowers to demonstrate their ability to repay the loan. Documents for this may include bank/investment account statements, 1099s, receipts from rents or leases or other business receivables.

Non-QM loans provide a solution to homeownership that those with uncommon circumstances might otherwise not have. The dream of homeownership is achievable with the help of non-qualified mortgages. QCBN

By Greg Riordan

Greg Riordan is a Loan Officer with Legacy Mutual Mortgage. For additional information or to get in touch with Greg, visit legacymutual.com/officers/greg-riordan or call 928.427.5156. You may find his office at 325 W Gurley St #102, Prescott, AZ 86301. Greg cares about the people that choose to trust him with the biggest asset in their lives – their home. He will give straight, honest answers with exceptional advice whether you are refinancing your home to pay off debt, lowering your rate, reducing the length of your loan or looking to purchase your first or next dream home. Greg Riordan, NMLS # 832841 | Gardner Financial Services, LTD., dba Legacy Mutual Mortgage, NMLS #278675, an Equal Housing Lender.