If you are in the market for loans and fail to meet the requirements of traditional loans, then a non-qualified mortgage loan is the right solution for you.
These loans are designed for home loans to help the borrowers buy their homes without getting into the complex requirements of eligibilities. It does not matter whether you are self-employed, doing a business, investing in real estate, or a freelancer, you won’t have to show proof of your employment.
Some characteristics of loans which you must look at before and if you think you cannot qualify for them.
The person borrowing the money must have a stable income and he would have to verify that through his bank statements and other documents.
There is a fixed threshold for the debt-to-income ratio and that is 42 percent and in some cases up to 55 percent debt-to-income ratio. The debt to income ratio is the percentage of your monthly minimum debt payments divided into your total monthly income or revenue.
Traditionally, loan terms are 15 years or 30-year terms to give borrowers enough time to repay the loan.
Risk-free loan features
These loans do not come with any such features that can make the loan less risky for the borrowers. For example, non-QM loans do not offer any negative amortization or interest-only loan option. Some lenders may offer an interest-only option but it will come with a higher interest rate typically a quarter to half point add to the rate.
Pros of Non-Qualified Mortgage loans
- These Non-QM loans allow those buyers to borrow money who have a low credit score, minimum 660 FICO. In the case of the traditional loan, the person must have a credit score of 700 or higher while in the case of non-qualified loans its lower
- Does not require full income documentation
- The application process is similar to traditional loans, so it does not make much difference in time to get approved and funded.
Cons of Non-Qualified Mortgage Loans
- The interest rates are usually higher in these loans as compared to the other loans and the basic reason is that you do not have to submit any employment documentation
- Non-QM loans are usually difficult to find in the market.
Who can get the Non-QM loans?
There are different people with somewhat similar characteristics who qualify for these loans.
- A buyer with a high debt-to-income ratio
- Gig Workers
- Business owners
Benefits of Non-Qualified Mortgage Loans
Some of the key benefits of the Non-QM loans are listed below which offers all the borrowers an opportunity to make a difference in their lives. Moreover, it offers a chance to all Americans to achieve success in homeownership if they are not eligible for qualified mortgage loans.
- Versatile and flexible guidelines.
- In some cases, Non QM loans close faster then QM loan.
- Great for 2nd homes or investment properties.
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