Non-Qualified Mortgage (Non-QM) loans are typically for borrowers with unique income qualifying circumstances. There are millions of people who may have the income but don't qualify with their tax returns, W-2s or pay stubs alone.
Many people have fluctuating incomes, lump sum incomes or are self employed such as independent business owners, entrepreneurs, contractors, hospitality workers, retirees, actors, artists, musicians, etc.
Who Can Benefit from a Non-QM Loan?
Self-employed borrowers are often paid sporadically and have more than one stream of income, which makes it difficult for them to obtain a qualified mortgage. These individuals typically turn to loans based on their bank statements as opposed to their W2s.
Real estate investors will typically generate a lot of income at once from the homes they purchase, followed by needing substantial funding quickly.
Prime borrowers are often keen to take advantage of Non-QM loans since they usually have great credit but are looking to take on a loan that may have interest-only payments or who have a higher than normal debt-to-income ratio.
Foreign nationals wanting to buy property in the U.S. may not have a credit score in order to qualify for a traditional loan. These non-resident borrowers are often helped by their high income, considerable liquid assets, or large down payment.
Near or non-prime borrowers who don’t have enough credit, a prior bankruptcy, or distressed property sale within the last two years are often good candidates for Non-QM loans.
What Is a Non-QM Loan?
How Do Non-QM Mortgages Work
Non-QM loans can fill the niche for those who don't necessarily fit into the "qualified-mortgage box." A qualified mortgage follows rules set by the CFPB and Federal Government; however, a Non-QM loan use alternate methods of income verification to help you get approved for a mortgage loan.
What a Non-QM Loan Is Not:
- It is not a subprime mortgage
- It is not a "stated-income" loan
What a Non-QM Loan Is:
- A home financing solution for responsible borrowers with unique financial circumstances
- A flexible home loan that covers a variety of consumer needs
Types of Income Verification Methods Allowed for Non-QM Loans:
Full Documentation (same as qualified mortgages)
One-Year Tax Return Program
- Personal tax returns for the 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
Non-QM Loan Benefits
- Ideal for self employed and or people with non-traditional financial circumstances
- Alternative income verification methods accepted
- Multiple fixed and adjustable loan options are available
- Loan maximum is as high as $2.5 million
- Cash out may be as high as $500,000
- Second homes and investment properties may be eligible
- A Non-QM loan means you can stay liquid rather than pouring all your cash assets into a real estate purchase, allowing you to diversify your investments. Furthermore, your mortgage interest payments with a Non-QM loan can be deducted each year on your income taxes. Consult a tax advisor for financial or tax advice.
- Non-QM loans further protect you from unexpected downturns in the market, keeping you from losing a financial investment.
A New American Funding Loan Officer can assess your individual employment, asset and income profile to determine if this product is right for you. It fits a broad range of potential consumers, so speak with a lending professional to determine your eligibility today.
Non-QM Home Loan Options
The Non-QM loan can be used for a rate-and-term refinance, a cash out refinance, a new home purchase for owner-occupied or second homes.
Give us a call to learn more about how a Non-QM loan might be the right home financing solution for you.