If you have been told you do not qualify for a traditional mortgage because of credit, income, property, or all of the above – a Non-QM Mortgage will likely be your solution.

Here we’ll cover everything you need to know what Non-QM Mortgage Loans and what you can expect if seeking mortgage approval.

What is a Non-QM Mortgage?

A non-QM mortgage is a home loan that allows borrowers to get approved for financing even if they do not meet traditional lending guidelines.

These loans are also commonly referred to as portfolio loans.

With a non-QM mortgage your scenario can be looked at with more of a common sense approach than a “traditional” home loan. You have the opportunity to accomplish your home ownership goals even if you don’t meet normal lending guidelines.

What types of Non-QM Mortgage programs are available?

Depending on your situation, you may fall into one of several cases where a portfolio loan or non-QM loan will be needed.

Here are the most common reasons a non-qm mortgage is used:

• Low credit score or recent credit event (bankruptcy, foreclosure, short sale)
• Business owners who have unique income on tax returns
• Real estate investors looking to get approved based on property cash flow
• Unique property type
• Foreign national with limited or no history in the US

Below we’ll cover each product in detail.

Bad Credit | Non-QM Mortgage

If you previously fell on hard times, and are now back on your feet, this may be the option you have been looking for.

Non-QM mortgages allow for as low as 500 credit score, and are available as soon as 1 day out recent foreclosure.

There is no long drawn out waiting period after the time your foreclosure or bankruptcy has been completed.

Traditional mortgages require 2-4 years after bankruptcy and 3-7 year waiting period on foreclosure.

With a non-QM mortgage you do not have a waiting or “seasoning” period.

Keep in mind, the more recent the event (and the lower the credit) the more down payment that will be required.

These loans typically have higher rates and costs that traditional mortgages. They are meant to be a short term solution for short term circumstances. These loans give you the opportunity to build equity instead of renting.

Once you’re eligible for traditional financing, you’ll be looking to refinance out of the non-QM mortgage.

Bad Credit Non-QM Mortgage | Highlights

• As low as 500 credit score
• Available as soon as 1 day out of foreclosure or bankruptcy
• Minimum down payment is 10%
• Available on home purchase, refinance, and cash out refinance
• Okay on primary residence, vacation home, and investment property

Self-Employed | Bank Statement Mortgage

If you’re self-employed it is likely you have the opportunity to take advantage of substantial tax write-offs that are available to you.

Once those write-offs are applied on your tax returns, your bottom line can often come up short when applying for a traditional mortgage. This can cause a debt-to-income ratio challenge.

With a non-QM mortgage, you can get approved based on your bank statement deposits NOT tax returns.

This is called a Bank Statement Mortgage loan program.

For the bank statement loan you’ll provide 12 months bank statements (personal or business). The lender will calculate your income based on average monthly deposits.

In some cases, the lender will ask for 24 months bank statements if the 12 provided are inconsistent. 24 months also may be required if doing low down payment.

The bank statement loan will require proof that you have been in business for at least 2 years. Anyone listed on the bank statements must also be on the loan.

If using business bank statements you must be 100% owner of the business.

Bank statement loans are a breath of fresh air for countless business owners who have been told they cannot qualify for a home loan.

On a case by case basis only, business owners are able to apply with a profit and loss statement if it is signed off by a CPA or tax preparer.  

Business Owners Non-QM Mortgage | Highlights

• At least 10% down payment
• Must have been in business for at least 2 years
• Okay on purchase, refinance, and cash out refinance
• Available for primary residence, vacation home, and rental property

More on bank statement loans here.

Real Estate Investors 

Similar to business owners, real estate investors are likely to show significant write-offs on tax returns. This can hinder their ability to get approved for a traditional mortgage.

With a non-QM mortgage investors are able to get approved based on property cash flow, NOT tax returns.

The way the income approval is done is that the lender will get a 1007 rent schedule from the appraiser to confirm fair market rent. If the property pays for itself there is no further income review. This would be for a home purchase.

On a refinance, the lender would get the 1007 rent schedule as well as a current lease agreement to confirm rent covers the new payment plus taxes/insurance and association dues if applicable.  

Unlike traditional mortgages, with these types of cash flow home loans there is no limit to the number of properties the investor can own.

Real Estate Investors – Non-QM Mortgage | Highlights

• At least 20% down payment
• Investment property only
• Available on investment property purchase, refinance, and cash out refinance
• Income is approved based on rent, NOT personal income
• Tax returns are not required

More on real estate investor loans here.

Unique Property Type | Non QM Mortgage Loan

Sometimes the only issue with a deal is unique property type.

Even if the borrower has perfect credit, high income, and strong down payment – a non-QM mortgage might be needed if the property is unique.

The issue with unique properties is that it can be difficult to find comparables (recent sales of homes in the area that are similar). This is what makes it risky for a lender.

For that reason, you may be asked to put a larger down payment and/or accept less than favorable terms. But if you still want the property, the option may be there with a non-QM mortgage.

Property Issues | Non-Warrantable Condo

It is very common to get into a situation where the condo you’re looking to finance doesn’t meet traditional lending guidelines.

This could be because there are a high number of units owned by one entity, or because the condo is in the middle of pending litigation.

Issues like theses can make the condo “non-warrantable” and may require a non-QM mortgage.

However, many times when we look at non-warrantable condo situations it turns out the condo is okay as long as the buyer is able to put at least 10% down payment.

More on non-warrantable condos here.

Unique Property Non-QM Mortgage | Highlights

• 10-30% down payment depending on the scenario
• Primary home, vacation home, and investment property
• Home purchase, refinance, and cash out refinance
• Available for non-warrantable condos, hobby farms, log cabins, and other unique property types

Foreign National | ITIN Mortgage Loan

If you’re new to the US or just looking to buy real estate in the US, a non-QM mortgage may be your ticket to get approved for funding.

This is a unique product type because some lenders require that you do not work and/or live in the US, and some lenders allow it.

The main issues (with regard to traditional loans) is the lack of credit being established in the US, and getting proof of income.

With these foreign national loans no credit score is required and no social security number is required.

These are often referred to ITIN loans since foreign nationals are not able to obtain a social security number.

Foreign National Non-QM Mortgage | Highlights

• Minimum down payment is 15%
• Can get approved based on 12 months bank statements (personal or business)
• Most property types are allowed
• Available in all 50 states

In Summary

A non-QM mortgage is often the perfect solution to many unique home loan scenarios.

Just because you do not meet traditional lending standards doesn’t mean you can’t accomplish your home ownership goals.

Before giving up on your home ownership dreams, find out if a non-QM mortgage might be the right fit for you.

I invite you to reach out.

Get your questions answered.

 

We have gotten many borrowers all over the country approved for a mortgage even when other lenders said it could not be done.

If we cannot help, I should be able to give you the guidance needed to get approved in the near future.