What is Non-QM and How It May Affect You

Non-QM Loans

A Non-Qualified Mortgage is offered referred to as a Non-QM loan. The simple answer is it fits borrowers that do not qualify for traditional standard qualified mortgage loan. When the market fell apart back in 2008, many of the “exotic” mortgage loans like pay-option ARM’s and other adjustable loans wiped many homeowners out of their homes. This is why Non-QM loans can be frowned upon, however, these loans are held to higher standards then their predecessor loans. Qualifying for a Non-QM although more lenient than traditional qualified loans is still difficult.

Non-QM Loans Are Growing In Larger Numbers

The popularity of these loans grows as Bankrate states with housing prices increase and qualifying in a traditional way becomes more challenging.

Three types of borrowers benefiting from Non-QM loans:

1. No income documentation-This is huge. Especially for self-employed, sub-contractor borrowers and even W-2 borrowers that have Schedule A deduction expenses. Some programs rely on bank statement deposits while others review assets. It’s no surprise this is a popular loan product for borrowers that don’t fit the mold.

2. Investors are interested in these loans based on qualifying factors for fix-n-flip properties and/or non-existent rental income while they rehab.

3. Borrowers that have credit issues such as Bankruptcy or lower FICO scores with late payments or a distressed sale utilize these loans.

If any of these apply to you or you’ve been declined or even know ahead of time, your loan is non-traditional, contact a mortgage broker for a free, no-cost evaluation of your loan scenario.