NON-QM Mortgage Guidelines On Down Payment And Loan Limits

NON-QM Mortgage Guidelines On Down Payment And Loan Limits

This BLOG On NON-QM Mortgage Guidelines On Down Payment And Loan Limits Was UPDATED On September 3rd, 2018

Non-QM Loans and Bank Statement Loans are now in full force for home buyers who cannot qualify for government and conventional loans.

  • There are no waiting period requirements after a housing event (foreclosure, deed in lieu of foreclosure, short sale) with non-qm loans
  • NON-QM Mortgage Guidelines state that borrowers can qualify for a mortgage one day out of foreclosure and/or short sale
  • Self Employed borrowers can now qualify for bank statement loans for self employed borrowers
  • Under NON-QM Mortgage Guidelines, no tax returns are required on our bank statement non-qm loan programs
  • No mortgage insurance is required on our non-qm loan and bank statement loan programs
  • Due to the launch of non-qm and bank statement mortgage loan programs, lenders are loosening their mortgage guidelines and overlays
  • 10% to 20% down payment is required on non-qm and bank statement loans under NON-QM Mortgage Guidelines
  • The amount of down payment required on home purchase depends on the borrowers credit scores
  • There are no loan limits on non-qm and bank statement mortgage loans for self employed borrowers

Lenders Loosening Overlays Due To NON-QM Mortgage Guidelines

There are more and more mortgage lenders that have been loosening their credit guidelines and overlays in hopes of capturing more home buyers.

  • Most lenders have mortgage overlays
  • Overlays are additional internal mortgage guidelines above the minimum federal guidelines for FHA, Fannie Mae, Freddie Mac, USDA, and VA Guidelines
  • For example, to qualify for a FHA insured mortgage loan with 3.5% down payment, the minimum credit score FHA requires is a credit score of 580
  • A large percentage of mortgage lenders did not accept any borrowers with credit scores below 640
  • Now many lenders who had 640 credit score overlays have dropped their minimum 640 credit requirement to 620 and some have even dropped them to 580 credit scores
  • Same with conventional mortgage loans
  • The minimum credit score required for a conventional mortgage loan is 620
  • Many conventional mortgage lenders have credit score overlays of 680
  • However, I have seen many lenders in recent months where they have dropped their minimum credit score requirements on conforming credit requirement to 620

Lenders Specializing In Home Loan With Bad Credit

Borrowers seeking a home loan with bad credit are in luck.

  • Many lenders like myself specialize in helping home buyers with bad credit
  • The Gustan Cho Team at Loan Cabin Inc. are direct lenders with no overlays on government and conventional loans
  • If borrowers gets an approve/eligible per DU FINDINGS and/or LP FINDINGS, this borrower is approved as long as they can satisfy all conditions on AUS
  • Mortgage lenders have also loosened up mortgage standards on past prior credit as well
  • Just a couple of years ago it was unheard of lenders accepting borrowers with an outstanding judgment and/or tax lien
  • Now, most will accept borrowers with outstanding judgments and/or tax liens as long as they have the following:
    • a written payment agreement  with judgment creditor and/or Internal Revenue Service in force
    • have made at least three timely payments
    • can provide cancelled checks for those three payments
  • Mortgage lenders are more understanding with outstanding collections as well
  • HUD Guidelines do not require borrowers to pay off an outstanding unpaid collection to qualify for FHA Loans

Mortgage Lender Overlays Versus Agency Guidelines

Most lenders their own overlays on collection and charged off accounts. They require borrowers to have outstanding collections and charged off accounts paid off prior to or at closing in order to fund the mortgage loan.

  • The reason why lenders are so paranoid about outstanding unsatisfied collection accounts is because collection and charged off accounts can turn into judgments
  • Many lenders have now eased mortgage standards on outstanding collection accounts where it does not have to paid
  • However, FHA has implemented new collection account guidelines where 5% of the outstanding collection balance needs to be used in calculating debt to income ratios on non-medical collections
  • Medical collections are exempt from HUD guidelines
  • The new collection accounts mortgage standards are only for non-medical collection accounts with balances of $2,000 or greater

Borrowers who need to qualify for non-qm loans or bank statement loans for self employed borrowers can contact Gustan Cho Associates at 262-716-8151 or text us for faster response. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho

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