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QM stands for qualified mortgage. Qualified mortgages, or traditional mortgages, are the most common type of home loan. They protect lenders by requiring certain criteria that borrowers must meet. These criteria include a term of 30 years or less, adequate verifiable income, a low debt-to-income ratio, low points and fees, and no risky loan features.
Non-qualified mortgages, or non-QM loans, are mortgages that do not meet these strict borrower requirements. They are still subject to guidelines and have a similar lending process, but they are available to homebuyers who may not qualify for traditional loans. This type of loan provides more opportunities to people who wouldn’t otherwise be able to buy a home.
Non-QM loans are the ideal solution in several scenarios. Borrowers might be self-employed, retired, or live off investments and therefore not have verifiable income. They may have income that is much higher one month and much lower the next month instead of having a steady salary. They might have a higher debt-to-income ratio or a bad credit score. Or, they might want an interest-only loan or another feature that is deemed risky. All of these situations can benefit from non-QM loans.
Non-qualifying loans are completely safe for borrowers! Since they’re subject to a set of guidelines, they aren’t any riskier for you than any other mortgage loan on the market. They offer a great opportunity for many people to purchase a home.
However, non-QM loans are more difficult to get and they are not backed by government agencies such as FHA, VA, Fannie Mae, or Freddie Mac. They also usually have higher interest rates and fees than traditional mortgages.
Whether you’ve been furloughed from work due to COVID, you’re struggling with less-than-perfect credit, you have non-verifiable income, or any other reason, you may be wondering how to get a non-QM loan. The steps are very similar to a traditional mortgage!
First, make sure you can make the monthly payments. These loans are intended for homebuyers who can’t check all the boxes for a traditional loan, but they are not intended for homebuyers who can’t afford a mortgage payment. It is important that you’re certain you have the income to make your payments on time each month before considering a non-qualifying mortgage.
Then, find a lender that will accommodate your needs. With non-QM loans, lenders do not have the same liability protection as they do with qualified mortgages. For this reason, it is often more difficult for borrowers to find non-QM lenders. But, as long as you have healthy finances and you look in the right places, there are plenty of non-QM lenders who are willing to accept your mortgage application!
At HelpWithMyLoan, you can connect with 300+ banks and alternative lenders by filling out just one form! Many of them are are willing to approve non-qualified mortgages. Apply today to find a trusted, experienced lender for your non-qualifying loan!