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 tax returns.
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.
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.
Borrowers with sizable assets and prime credit may decide on a non-QM loan in order to maintain a positive cash flow rather than just buying the home in cash.
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.