Some borrowers do not meet the credit requirements or income documentation necessary for a conventional Qualified Mortgage (QM) loan. For those borrowers, we offer a large variety of Non-Qualified Mortgage (Non QM) loans.
A Non QM differs from a standard QM and is designed to provide flexibility in lending standards to accommodate borrowers who do not fit traditional lending criteria. Non QM home loans are for individuals who may have unique financial circumstances, allowing them to obtain mortgage financing through alternative means of income verification and credit evaluation. Unlike Qualified Mortgages, which adhere to strict federal guidelines, Non QM loans are not bound by the same criteria set by the Consumer Financial Protection Bureau (CFPB). This makes them an attractive option for those who may have credit issues like a recent bankruptcy or foreclosure or issues with documenting their income.
What are Non QM Loans?
Non QM loans are mortgage products that do not conform to the standard underwriting guidelines set forth by the Consumer Financial Protection Bureau (CFPB) under the Qualified Mortgage rule. Qualified Mortgages adhere to specific criteria regarding borrower qualifications, loan terms, and fees to minimize risk to both lenders and borrowers. Non QM loans, on the other hand, offer more flexibility and are designed for borrowers who may not meet these strict requirements.
Key Features of Non QM Loans
Alternative Income Documentation: Unlike traditional mortgages that require W-2s, pay stubs, and tax returns, Non-QM loans may accept alternative forms of income verification. This can include bank statements, profit and loss statements, or asset documentation.
Higher DTI Ratios: Non QM loans often allow higher debt-to-income (DTI) ratios, accommodating borrowers with substantial debt or unconventional income streams.
Flexible Credit Requirements: There are Non QM loans available to borrowers with lower credit scores, even as low as a 500 credit score.
No Waiting Periods: No mandatory waiting periods after credit events like bankruptcy or foreclosure.
Non-Owner Occupied Properties: Non QM loans can be used to finance investment properties or second homes, not just primary residences.
Types of Non QM Loans
Alpine Mortgage is a Non QM mortgage company with a variety of Non QM loan programs to cater to our borrower's needs. Here are the main types of Non QM Loans we offer:
Alternative Documentation Options
Our Non QM loan programs offer different income verification options such as:
Bank Statement Loans: For self employed borrowers that can verify their income with deposits on their bank statements.
Profit & Loss Loans: Another program for self employed borrowers where qualification is based on a profit & loss statement for the business. No bank statements or tax returns are required.
1099 Income Loans: For independent contractors that can qualify with their 1099 form.
Asset Depletion Loans: Allows borrowers to use their substantial assets to qualify for a mortgage instead of employment income.
Debt Service Coverage Ratio Loans (DSCR Loans): For real estate investors that can qualify for a loan based on the cash flow of a rental property.
Borrowers with Credit Issues
Our Non QM loan programs are also designed for borrowers with different credit issues such as:
Low Credit Scores: Minimum credit score as low as 500.
Bankruptcy: No waiting period after a Chapter 7 or Chapter 13 bankruptcy.
Previous Foreclosure: No waiting period after a foreclosure.
Choosing the Right Non QM Lender
When exploring Non QM loan options, it's crucial to work with a reputable and experienced lender who specializes in this area. At Alpine Mortgage, we pride ourselves on our expertise in Non QM lending and our commitment to helping borrowers find the right loan solution for their unique needs.
Here are some factors to consider when choosing a Non QM lender:
Experience: Look for a lender with a proven track record in Non QM lending. Experienced lenders will have a deep understanding of the various loan programs available and can guide you through the process with confidence.
Product Offerings: Choose a lender that offers a wide range of Non QM loan products to ensure you have access to the best options for your financial situation. At Alpine Mortgage, we offer a comprehensive suite of Non QM loan programs to meet the diverse needs of our borrowers.
Reputation: Research the lender's reputation in the industry and read reviews from past borrowers. A reputable lender will have a history of satisfied customers and positive feedback.
Customer Service: Work with a lender that prioritizes customer service and communication. A responsive and supportive lending team can make the process smoother and less stressful.
Competitive Rates and Fees: While Non QM loans may have slightly higher rates compared to traditional mortgages, it's still important to shop around and compare offers from multiple lenders. Look for a lender that offers competitive rates and transparent fees.
The Non QM Loan Process
Applying for a Non QM loan is similar to the process for a traditional mortgage, with a few key differences. Here's what you can expect:
Pre-qualification: Before beginning the formal application process, you can complete a pre-qualification from a Non QM lender. This involves providing basic information about your income, assets, and credit to determine your eligibility and potential loan terms.
Application: Once you've found a property and are ready to move forward, you'll submit a formal loan application. This will include detailed information about your finances and the property you wish to purchase.
Documentation: Your lender will request various financial documents to verify your creditworthiness. For Non QM loans, this may include alternative documentation such as bank statements, profit and loss statements or leases for investment properties.
Underwriting: The lender's underwriting team will review your application and supporting documents to determine your eligibility for the loan.
Appraisal: An independent appraisal of the property will be conducted to ensure its value supports the loan amount.
Loan Approval & Closing: If your application meets the lender's criteria, you'll receive a loan approval, which may include specific conditions that need to be met before closing. Once all conditions are satisfied, you'll attend a closing meeting to sign the final loan documents and complete the transaction.
Who is a Non QM Loan for?
Non QM loans are ideal for a variety of borrowers who find that traditional mortgage products do not meet their needs. This includes:
Self-Employed Individuals: Those who run their own businesses or work freelance may have difficulty presenting traditional proof of income documents. Non QMs allow them to use alternative methods to verify their income.
Real Estate Investors: Investors often turn to Non QM loans due to their ability to finance properties that might not qualify under standard lending guidelines. This can include fix-and-flip projects or rental properties.
Borrowers with a Non-Traditional Credit History: Individuals who do not have a standard credit history or who have had past credit issues may find more flexible borrowing options with Non QM loans.
High Net Worth Individuals: Those with significant assets but irregular income streams can benefit from asset-based lending options available within Non QM loans.
Benefits of Non QM Loans
Non QM loans offer several advantages for borrowers who might not fit the mold of traditional mortgage applicants. Here are some key benefits:
Flexibility in Income Verification: Non QM loans provide alternative methods for verifying income, such as bank statements or asset documentation. This flexibility is particularly beneficial for self-employed individuals, business owners, and those with non-traditional income sources.
Tailored Loan Products: Non QM loans are customizable to meet the specific needs of different borrowers. Whether it's an investment DSCR loan, a bank statement loan, or a loan for foreign nationals, Non-QM products can be tailored to fit unique financial situations.
Access to High-Value Properties: Jumbo Non-QM loans allow borrowers to finance high-value properties that exceed conforming loan limits. This access to larger loan amounts makes it possible for buyers to purchase luxury homes or investment properties.
Potential Drawbacks of Non QM Loans
While Non-QM loans offer significant benefits, there are also some potential drawbacks to consider:
Higher Interest Rates: Non QM loans typically come with higher interest rates compared to Qualified Mortgages. The increased risk to lenders due to the flexible qualification criteria often results in higher borrowing costs for borrowers.
Larger Down Payments: Non QM loans may require larger down payments, sometimes 20% or more, to offset the increased risk to lenders. This requirement can be a barrier for some borrowers who may not have substantial savings.
Non-Qualified Mortgages offer flexible, accessible loan options for those who might not fit the mold of traditional borrowing. Whether dealing with credit challenges, irregular income, or unique investment needs, Non QM loans provide a pathway to homeownership where traditional mortgages might not. For anyone considering a Non QM, it's essential to consult with a Non QM mortgage lender or a mortgage broker to understand fully the benefits and potential risks associated with these loan types. Alpine Mortgage offers Non QM loans in the following states: California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Texas.
If you are interested in learning more about our Non QM loan programs, call us today at (800) 876-5626 to speak with one of our Non QM loan specialists or click here to have one of our Non QM loan specialists contact you.
If you are interested in applying for a Non QM loan, you can apply online now.
Non QM Loans FAQs
Yes, refinancing with a Non QM loan is possible and can be beneficial for borrowers who do not qualify for traditional refinance options. Refinancing can help lower monthly payments, access equity, or change the loan terms to better fit the borrower's needs.
Prepayment penalties vary by lender and loan type. Some Non-QM loans may include prepayment penalties, while others do not. It’s important to review the loan terms carefully and discuss any potential penalties with your lender before committing to a loan.
Non QM loans can be an option for first-time homebuyers who do not meet the strict requirements of traditional mortgages. However, it is important for first-time buyers to carefully consider the terms and ensure they can meet the repayment obligations.
The down payment required for a Non-QM loan varies but is typically higher than for traditional mortgages. Borrowers may need to put down 20% or more to qualify, depending on the lender's criteria and the borrower's financial situation.
