If you're self-employed, retired or had some credit issues in the past, getting approved for a home loan can be a challenge. After all, a traditional loan (also known as a Qualified Mortgage) usually requires traditional sources of income (i.e., tax returns, W-2s or pay stubs) and certain guidelines of creditworthiness for qualification.
A Non-Qualified Mortgage (Non-QM) loan allows the borrower to provide alternative income sources for lenders to consider (i.e., bank statements). Because they are not subject to all the same guidelines as QM loans, Non-QM loans provide lenders added flexibility in weighing borrowers' qualifications.
When choosing a Non-QM lender to meet your loan needs, it's important to understand what makes your application more attractive to lenders.
What Lenders Are Looking For
When considering your loan application, Non-QM lenders are generally looking for:
- Assets in lieu of standard proof of income
- 6 months of reserves in savings
- Stable income
- Good credit
If all of these things aren't perfect, don't fret. For example, maybe you're retired and have a lack of steady income. However, if you have plenty of assets, you may be able to overcome the perception. The same applies for a borrower who receives their income in a lump sum or have an income that fluctuates.
In addition, Non-QM loans are a possible option for borrowers with a debt-to-income ratio higher than 43% (the maximum debt ratio for QM loans). Of course, good credit helps to offset this.
It's important to note that the borrower must satisfy the Ability-to-Repay (ATR) requirements set forth by the Consumer Financial Protection Bureau. This means that the lender is required to evaluate and ensure the borrower's ability to repay the loan. This factors in the borrower's current income, assets, employment, credit history and monthly expenses, as well as potential mortgage payments, property taxes and required insurance.
Finding the Non-QM Lender for You
When choosing the right Non-QM lender, it's important to do your homework and ask some key questions:
- Does the lender have a history of working with Non-QM loans?
- What kind of reviews does the lender get online from other borrowers?
- Has the lender shown a history of understanding the unique needs of borrowers?
The good news is that New American Funding not only offers Non-QM loans, but has a variety of Non-QM Loan Products to choose from. Our helpful Loan Officers have extensive experience with these loans, plus tens of thousands of reviews and counting. Contact us today to discuss your unique loan needs and make the home of your dreams a reality.