Non-QM Loans: Frequently Asked Questions

A non-QM loan, or non-qualified mortgage, is one option that can help a potential borrower become a homeowner, particularly if they earn their income in a non traditional manner. If you are located in the state of Florida, and want to know more about buying a home with a non-QM loan, CTC Mortgage can help. Continue reading to get answers to the most frequently asked questions about non-QM loans.

What Is A Non-QM Loan, And How Does It Work?

A non-QM loan is intended to help a borrower that has unique financial circumstances obtain a mortgage. These loans don’t meet the specific requirements in order to be classified as a qualified mortgage, meaning that they follow different eligibility guidelines than a conventional loan and aren’t solely based on standard loan requirements like credit score. Instead, they try to get a complete understanding of a borrower’s financial situation by using alternate methods of income verification to acquire a mortgage. A non-QM loan is different from a subprime loan in that it provides borrowers with unconventional income sources to prove their ability to pay off the loan and borrow money, whereas a subprime loan is intended for borrowers with far below average credit ratings.

What Are The Benefits And Potential Risks of a Non-QM Loan?

A non-QM loan can offer several benefits for a borrower by making it simpler for people that are self-employed or have an untraditional source of income to qualify for a mortgage. Non-QM loans tend to have less restrictive credit requirements, which makes it possible for a borrower who has had past financial issues like a bankruptcy or foreclosure to still qualify for a home loan. If a borrower has had a foreclosure, some lenders will allow them to get a non-QM loan as soon as a day after the event, so the processing time is quick. Although there are several benefits to a non-QM loan, it is important to understand there are certain risks as well. Non-QM loans also come with higher down payment amounts and higher interest rates. Additionally, there may be a higher risk of defaulting because of alternative payment methods.

What Is Required To Qualify For A Non-QM Loan?

In order to qualify for a non-QM loan, there are some general criteria that must be met in order to apply. Even if a borrower has a lower credit score, they can still qualify for a non-QM loan, with the average minimum score being 500 – 620. Non-QM lenders are able to offer more flexible debt-to-income ratios, (or DTI), with most approving mortgages for borrowers with a DTI of 50% or lower. To apply for a non-QM, be prepared to provide the proper documentation, including your identification, documents verifying your income and assets, profit/loss statements, list of debt, bank statements, etc.

If you are interested in learning more about non-QM loans in Florida, contact CTC Mortgage today for a consultation.

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