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Buying a Home with Non-Traditional Income Verification

Buying a Home with Non-Traditional Income

As mentioned in our recent blog about Home Loans for Self-Employed People, there are millions of individuals who may be able to purchase a home but have non-traditional incomes and don’t have the traditional income documentation required for qualified mortgage loans. These aren’t just the self-employed, but anyone with a fluctuating income or any one with the means and little or no monthly incomes to report.

From the self-employed to retirees many people might be able to pay cash for a home, but is that the most financially savvy use of that money? Not particularly, says an article from U.S. News. There are many reasons not to put all your money in one proverbial investment basket. There are a few reasons for this, which will be addressed below. But the need is one of the reason New American Funding has developed its Non-QM home loan.

Non-QM stands for “non-qualified mortgage” and it ticks a lot of boxes for responsible borrowers with unique financial profiles. The Non-Qualified Mortgage loan (Non-QM) is different as it can use alternate methods of income verification to help you get approved for a mortgage loan, and it doesn’t necessarily have to adhere to rules set forth by other loan options. It’s important to distinguish that these loans are not subprime loans and they’re not stated-income loans.  

Why opt for a Non-QM loan if you can afford to pay cash?

  1. Maintain liquidity. Real estate is known to be a very good financial investment, that’s true; however, nothing is infallible. If you put all your liquid assets into a cash home purchase, you may not have reserves for emergencies or other promising investment opportunities. With a Non-QM loan, you may qualify for a loan as high as $2.5 million, with as little as 5% down. This will allow you the opportunity to build equity with minimal cash outlay.
  2. Diversify your investments. Having a lot of smaller investments is often more advisable than putting all your assets in one large location.
  3. Take advantage of tax benefits. Though there have been recent changes to the tax laws, most homeowners still qualify to deduct the mortgage interest they’ve paid over the course of the year. For a large loan, this may be a sizable deduction.
  4. Protect against dropping home prices. If you put a substantial amount of cash in your home and the market takes a serious downturn, you would be protected from losing a large amount of cash or having to wait possibly years for the market to bounce back.

Additional Benefits of a Non-QM Loan

There are multiple fixed and adjustable loan options available through the New American Funding Non-QM home loan. It can be used for a new home purchase or a Rate and Term Refinance or Cash Out Refinance. Second home and investment properties may also be eligible, and if you do opt to take cash out, you can access as much as $500,000.

Types of Income Verification Options for Non-QM

Here are a few of the income-verification options available when applying for a Non-QM loan. Your New American Funding Loan Officer can help you understand the variety of ways you can verify your income, which helps all manner of people with non-traditional financial profiles.

One-Year Tax Return Program

  • Borrowers who amortize must be self-employed for two years
  • Personal tax returns for past year including all schedules and attachments
  • Business tax returns for same year with all schedules
  • Signed business Profit and Loss statement in many cases

Bank Statement Program

  • Personal or business statements
  • 100% of eligible deposits from personal and business accounts
  • Profit and Loss statement required for 12 months or previous year and YTD

Asset Depletion (purchase or Rate and Term Refinance only, owner-occupied or second homes)

  • 60-day account history required
  • 100% of vested retirement for borrowers over 59 ½ years old and 50% of vested retirement assets if borrowers are under 59 ½ years old
  • Used 3% rate of return on assets amortized over seven years

If you’d like to learn more about a Non-QM loan for you or your clients, contact a New American Funding Loan Officer today.

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