What Is a Non-QM Loan?

A non-QM loan is also known as a non-qualified mortgage. This type of mortgage does not meet the standard set by the Consumer Financial Protection Bureau to be eligible for this loan. In addition, this loan is designed to enable borrowers with different financial profiles who do not meet the requirements of a typical qualified mortgage. 

What Is a Non-QM Loan?

Unlike the traditional loan, this loan is not subject to the same protection as a qualified mortgage such as restrictions on how much a lender can charge in fee. It provides more flexibility. You can access this mortgage from a variety of lenders but the loan terms and qualifications vary among lenders.  If you’re interested in applying for this loan, read on for steps and guidelines to apply.

How Does It Work?

To begin with, if your credit history or income falls out of the required criteria for a standard mortgage loan program, you can consider a non-QM loan.  Besides, a non-qualified mortgage does not meet the standard of the Consumer Financial Protection Bureau (CFPB). So, if you want to make homeownership very quickly, but you do not meet the CFPB standard, you can try out or check out a non-QM loan.

When you apply for this mortgage, you can qualify for it through different means instead of the typical traditional income verification requirements like most loans. However, you need to make sure that you meet the lender or non-QM loan-providing company’s requirements. After which you can proceed to apply for a loan. All you need do is follow the prompts and provide all the important information required to complete the application process and you are good to go.

Who Benefits from Non-QM Loans?

You must know who can secure this type of loan to figure out whether or not you should proceed with applying. Note; if you are trying to refinance to a traditional loan and meet the standard mortgage guidelines, a non-qualified mortgage is a temporary solution. So, most lenders offer their services to:

  • Borrowers with high net worth.
  • Borrowers looking for an interest-only payment option.
  • Mortgagors who are self-employed.
  • Foreign national borrowers.
  • People investing in different rental units.
  • Prime mortgagors.
  • Borrowers with bad credit.
  • Real estate investors.
  • Non or near-prime borrowers.
  • Retirees.

So, if you want to buy your dream home and you are qualified for a traditional loan, you can still use a non-qualified mortgage.

Non-QM Loan Requirements

Here are the requirements needed to apply for a non-qualified mortgage:

  • Borrowers must have a minimum credit score of 620.
  • Employment history.
  • A stable income.
  • You must have a high debt-to-income ratio.
  • Bank account statements.
  • Income tax returns.
  • Business documents.
  • Pay stubs

Once you confirm that you are eligible, you can start searching for possible lenders that offer this loan type.

How To Apply for a Non-QM Loan

Applying for a non-QM loan is not very difficult to carry out. Besides, a lot of borrowers are searching for the best terms and the lowest interest rates. However, selecting the best option with the lowest rate will not favor you in the long run. Nevertheless, here is how to apply for or secure a non-qualified mortgage:

  • Find a good lender after comparing their rates.
  • Visit their official website or physical office.
  • Complete your application online or over the phone.
  • Lock in your rates based on the agreed terms and conditions.
  • Review it and provide the necessary documentation.
  • Submit it and wait for it to be reviewed or approved.

Once your loan is approved and additional documents are demanded, provide them and sign the deal. Lastly, after the whole procedure is successful, you will be credited and ready to refinance the home of your dreams.

Best Non-QM Loan Lenders

There are a lot of reputable lenders that you can use to obtain a non-QM loan. Even though obtaining a non-QM loan is not much of a hassle, selecting the perfect lender is very important. So, here are a few of the best that I can suggest to you:

  • Rocket Mortgage.
  • Angel Oak Mortgage Solutions.
  • CrossCountry Mortgage.
  • New American Funding.
  • Acra Lending.
  • North American Savings Bank.
  • Bay Equity Home Loans.
  • loanDepot.
  • Guaranteed Rate.
  • A&D Mortgage LLC.
  • First National Bank of America.
  • Northpointe Bank.
  • First Heritage Mortgage.
  • Trans United Financial Services.
  • LoanStream Mortgage.
  • NexBank.
  • Fairway Independent Mortgage Corp.
  • Academy Mortgage Corp.

And many more. But before you choose any company, you must compare their rates and find more information on them before choosing.