This BLOG On Lenders Offering Non-QM Loans After Foreclosure And Bankruptcy Was Written By Michael Gracz of Gustan Cho Associates
Let’s first discuss the definition of qualified mortgages or QM loan and Lenders Offering Non-QM Loans After Foreclosure And Bankruptcy:
Lenders Offering Non-QM Loans After Foreclosure And Bankruptcy are residential portfolio mortgage lenders. Not all lenders offer non-QM home loans. Michael Gracz of Gustan Cho Associates Mortgage Group is one of the few national Lenders Offering Non-QM Loans After Foreclosure And Bankruptcy:
- A qualified mortgage or a QM loan, simply means the loan must follow a set of standards put in place by the consumer financial protection bureau or CFPB
- A QM loan must document the consumer is able to repay the loan, it must follow the ATR rule
- The loan terms must be safe for the borrower and lastly, the terms of the loan need to be easy to understand
- These loans cannot have any harmful loan features such as Balloon payments, negative amortization, terms over 30 years, or interest-only payments
In this article, we will cover and discuss Lenders Offering Non-QM Loans After Foreclosure And Bankruptcy.
What Are NON- QM Loans?
A NON- QM loan is a loan that does not have to follow the agency guidelines.
- Such as Fannie Mae, Freddie Mac, VA, and FHA guidelines
- These loan instruments are able to operate outside of your typical mortgage lending guidelines put in place
- Even the consumer financial protection bureau has stated if a loan is not a QM loan, it can still be an appropriate loan
There are many different NON-QM loan products available such as the following:
- bank statement loans
- asset depletion loans
- foreign national loan programs
- other types of alternative financing
These loans are available for owner-occupied properties, second homes, and even investment properties.
Types Of Borrowers Benefiting From Lenders Offering Non-QM Loans
NON-QM loans are available for anybody who would like to use one but they are really geared towards self-employed borrowers and borrowers who have recently had financial struggles.
- Many self-employed borrowers find themselves not able to qualify for a home they would like to live in due to tax write-offs or deductions
- The bank statement loan program could be a life-changing loan for their family
- Many Americans faced financial hardships throughout the late 2000s and early 2010s
- A large number of these people cannot buy homes with FHA or conventional loan programs
- This is usually due to seasoning requirements from bankruptcies (backlink BK blog), foreclosures, short sales, or even a deed-in-lieu
- There are loan programs available one day after a foreclosure!
- There is light at the end of the tunnel
- Thousands of Americans cannot refinance their homes due to late payments, or move into a bigger home due to a few late payments
- I would strongly encourage those to check out a NON- QM loan product
- These loans are not permanent!
- Most NON- QM loans do not have a pre-payment penalty
- It is very common for a self-employed borrower to buy a home with a NON- QM loan and over the next few years file taxes with fewer deductions, and then refinance into an agency loan
- I like to call this a bandaid loan
For example, here is a case scenario:
- if you had a foreclosure 6 months ago
- but do not want to wait for the three-year seasoning requirement before buying a home with an FHA loan
- or even four to seven-year seasoning requirement for a conventional loan
- they can use the NON-QM loan and complete a refinance once seasoning timeframe has elapsed
This is the most common use for NON-QM loans.
What can I expect during the NON- QM Mortgage process?
The NON-QM mortgage process is very very similar to a traditional standard mortgage process.
- Borrowers complete a full loan application
- Borrowers still need to pull a tri-merged credit report, provide assets for the down payment, and follow debt to income ratios
- Borrowers will submit loan documents to loan officer just as they would for a QM Loan
- At this point, the loan will get pre-approved
- Once approved and borrowers can find a home, an appraisal is completed
- Mortgage Applicants file will go through an underwriting process to confirm borrowers fit into the NON-QM loan program
- The closing and funding of a NON- QM loan mirrors the closing and funding of traditional everyday mortgage
- NON- QM loans still must follow all TRID timeframe requirements and disclosures
A NON- QM refinance will have the three days right to rescission time requirements before funding on all owner-occupied properties.
What Is Needed To Get Started With Lenders Offering Non-QM Loans
A NON-QM loan will require a 10% to 20% down payment. Down payment required on home purchase depends on borrowers credit scores:
- The credit score requirement is much more relaxed than even an FHA loan
- Loan programs are available with credit scores down to 500
- Depending on the loan product that best fits borrowers situation, mortgage applicant will need to provide certain documentation
- Such as using business bank statements to qualify for income, borrowers will need to send in 24 months of the business account
- Borrowers using personal bank statements they only need 12 months personal statements
- Many self-employed borrowers love the one-year tax return loan program (A blog to come on this topic)
- This program is able to calculate borrowers income based on one year of IRS tax returns
Please reach out to Mike Gracz at (630) 659-7644 of Gustan Cho Associates to discuss what programs are available and which one will best fit your situation.