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What Are Non-QM Mortgages?
Non-QM loans or Non-Qualified Mortgages are portfolio loans that do not conform to Fannie Mae or Freddie Mac agency mortgage guidelines. Here are examples of non-QM mortgage loans:
- Bank StatementMortgage Loans for self-employed borrowers
- There is no income tax or income documentation required on bank statement mortgages.
- The average of 12 months of bank statement deposits is required to calculate income on bank statement loans.
- Non-QM Jumbo Loans with bad credit
- No Income Documentation Mortgage Loans
- No-Doc mortgage loans
- Asset-Based Loans
- Foreign National Loans (ITIN) mortgage loans
- Recent Credit Event Loans. …
- Commercial loans
- 1099 income-only mortgages
- Stated-income mortgage loans
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3 Replies
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Bank statement mortgage loans benefit self-employed and business owners who cannot qualify for a mortgage using traditional adjusted gross income from their business income tax returns.
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Mortgage underwriters of bank statement mortgage loans use non-traditional ways of calculating qualified income, unlike lenders of traditional government and conventional loans.
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Non-QM, or Non-Qualified Mortgage, also has applications to individuals whose scores and other Fannie Mae or Freddie Mac requirements may not fit. Some of the most common examples of such non-QM mortgage loans are:
Interest-Only Loans: For a certain amount of time, usually 5-10 years, borrowers will only make payments on their interest alone before they begin payments by both principal and interest. This makes the first few monthly payments lower.
Stated Income Loans: These loans allow borrowers to state their annual income without much documentation. They are often employed by self-employed individuals or those with variable incomes.
Bank Statement Loans: Self-employed borrowers are provided with such loans without traditional means of income documentation. Bank statements act as evidence of income, thus providing more leeway where income is concerned.
Debt Service Coverage Ratio (DSCR): These loans are aimed at investment properties, and the borrower’s capacity to meet the mortgage payment terms is evaluated using the rental income available rather than the borrower’s income.
Jumbo Loans: These loans exceed the conforming loan limits Fannie Mae and Freddie Mac set. They often have more flexible qualifying criteria, such as failing to meet standard guidelines, which can qualify them as non-QM.
Loans Offered to Foreign Nationals: These loans are geared towards people who are not citizens of the US but would like to own a piece of American real estate. Other such loan seekers usually have a different set of documents that emphasize their assets.
Based on Assets Loans:These loans allow borrowers to qualify based on available assets rather than earned income. This can be useful for a pensioner or someone with substantial savings.
Non-QM loans have advantages in terms of versatility to borrowers who do not conclusively conform to the basic criteria of a conventional lending framework. They are likely to have more leniency in terms of the documents required for income verification and the repayment terms, hence suitable for a vast range of people, particularly those who are self-employed or have atypical sources of income. It would be wise to ask the lenders about the details of non-QM loans and other obligations related to these loans.
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