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NON-QM Home Loan Guidelines For Borrowers With Bad Credit

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NON-QM Home Loan Guidelines For Borrowers With Bad Credit

This BLOG On NON-QM Home Loan Guidelines For Borrowers With Bad Credit Was Written By Michael Gracz of Gustan Cho Associates Mortgage Group at Loan Cabin Inc. NMLS 1657322

NON-QM Home Loan Guidelines And How It Benefits Borrowers Who Do Not Qualify For Traditional Mortgages:

We have all heard the stories of the last second mortgage denial nightmare.

  • In today’s highly regulated mortgage industry this seems to be a common trend
  • With the ever-changing guidelines many loan officers are not up to date with their knowledge of guidelines
  • This can cause problems throughout the entire process
  • Resulting in you losing earnest money, money for inspections, and money for the appraisal
  • At the end of the day you do not get your dream home and you’re out quite a bit of money
  • Gustan Cho Associates have received many phone calls about last second mortgage denials due to job gaps, declining income, late payments not being seasoned
  • While the loan officer is to blame, sometimes credit issues pop up during the mortgage process
  • This may be a hard stop for most lenders
  • Gustan Cho Associates have a whole line of NON-QM Mortgage Products that have saved the day in many occasions

What Are NON-QM Loans And NON-QM Home Loan Guidelines

A NON-QM loan program that does not follow FHA, VA, Fannie Mae, Freddie Mac, or USDA mortgage guidelines. Please check out QM MORTGAGE by the CFPB for more details on Qualified Mortgages.

  • Meaning these loan programs are a bit more lenient
  • While they have their own set of guidelines, the lender has the ability to make exceptions on a case by case
  • Making each approval unique

Types Of Borrowers Who Benefits With NON-QM Home Loans

We can share countless success stories about NON-QM Mortgages, but here are a few:

One of the most common uses for NON-QM mortgages saving the day have to do with the Foreclosure waiting periods for QM Mortgages.

  • Many borrowers do not understand the concept of foreclosure waiting periods
  • This can be incredibly frustrating when a borrower realizes their foreclosure waiting period does not start the day that leave the house, but it starts the day the county decides to record the transfer on the deed
  • There is no telling when the county will get around to recording the deed
  • Every county is different
  • When you get into some larger Counties such as Los Angeles, California or even Cook County, Illinois the process can take over a year at times
  • This can increase your foreclosure waiting period over 12 months
  • Meaning your two-year waiting period for a VA loan, three-year waiting period for an FHA loan, or seven year waiting period for a conventional loan may not start for months after you vacate the property
  • The good news is NON-QM mortgages do not have a seasoning requirement for mortgage foreclosures
  • ONE DAY AFTER A FORECLOSURE YOU CAN BUY A HOME WITH A NON-QM LOAN

NON-QM Home Loan Guidelines On Student Loans

Deferred student loans and Income Based Repayment plans (IBR) can ruin your home buying power.

  • Many loan programs such as FHA loans do not allow an income-based repayment plan to be used
  • Even if your student loans are deferred you still need to include a monthly payment of 1% of balance due against your monthly debt to income ratio
  • While conventional loan to do allow the use of income-based repayment plans they must factor in deferred student loan payments
  • VA loans do allow you to omit a deferred student loan if the loan is deferred for 12 or more months (from closing date)
  • VA loans and income-based repayment plans are rarely used for DTI purposes
  • This is when NON-QM loans can help many borrowers
  • If your student loans are in deferment for 12 or more months, THEY WILL BE EXCLUDED FROM YOUR DTI RATIO!
  • That’s right, this has saved many deals. when a loan officer who does is not up to date on STUDENT LOAN GUIDELINES your pre-qualification may not be accurate, leading to a last second denial

NON-QM Home Loan Guidelines On Self Employed Borrowers

Self Employed borrowers use NON-QM loans all the time.

  • The main reason being tax returns and debt to income ratio guidelines
  • Majority of self-employed Americans use tax write-offs when filing their Federal IncomeTax Returns
  • While these write-offs are legal they can stand in your way from obtaining a mortgage. If you have write offs on your tax returns and are looking for a mortgage you should read our blog on BANK STATEMENT LOANS
  • This is a great loan product to start building equity in a property as you file your taxes stronger for two years

Starting The Mortgage Process On Non-QM Loans

What are the steps to starting a NON-QM Loan application?

That is very simple. The process is the same as a regular loan application. You will send in the following information:

  • Last 60 Days Bank Statements – to source down payment
  • Last 30 Days Pay Stubs
  •  Last Two Years W-2’S
  • Last Two Years Tax Returns
  • Driver’s License
  • Copy of social security card

If using a bank statement loan:

  • Last 60 Days Bank Statements – to source down payment and calculate income
  • Driver’s License
  • Social Security Card

Then call me on 630-659-7644 and I will send you an application link!

For more information on NON-QM loans please reach out to Mike Gracz on 630-659-7644 or email me at mgracz@gustancho.com. I am an expert in NON-QM Lending and can answer any questions you may have!

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