NON-QM Mortgage Guidelines On Down Payment And Loan Limits

NON-QM Mortgage Guidelines on Non-Conforming Loans

Gustan Cho Associates are mortgage brokers licensed in 48 states

This article is about NON-QM Mortgage Guidelines on primary homes, second homes, and investment properties. Every non-QM lender has their own non-QM mortgage guidelines. Gustan Cho Associates has dozens of different lending relationships with wholesale non-QM mortgage lenders.

Every non-QM wholesale mortgage lender has different non-QM mortgage guidelines concerning the down payment, loan-to-value, reserves, credit score, debt-to-income ratio, and income documentation requirements. In this blog, we will talk about the general non-QM mortgage guidelines on non-QM and non-conforming loans.

What Are Non-QM Mortgage Loans?

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Non-QM Loans and Bank Statement Loans are now in full force for homebuyers 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 short sale. Self Employed borrowers can now qualify for bank statement loans for self-employed borrowers.

Non-QM Versus Qualified Mortgages

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Under NON-QM Mortgage Guidelines, no tax returns are required on our bank statement non-QM loan programs. Our non-QM loan and bank statement loan programs require no mortgage insurance. Due to the launch of non-QM and bank statement mortgage loan programs, lenders are loosening their mortgage guidelines and overlays.

A 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 a home purchase depends on the borrower’s credit score. 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.

More and more mortgage lenders have been loosening their credit guidelines and overlays to capture 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 an FHA-insured mortgage loan with a 3.5% down payment, the minimum credit score FHA requires is 580.

A large percentage of mortgage lenders did not accept any borrowers with credit scores below 640. Many lenders with 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.

Non-QM Mortgage Guidelines on Credit Scores

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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 who have dropped their minimum credit score requirements to 620 FICO on conventional loans and FHA and VA loans to 500 FICO.

The minimum credit score requirement on FHA and VA loans is 500 FICO. Non-QM loans have their own non-QM mortgage guidelines on non-QM loans. The lower the credit score on non-QM loans, the higher the down payment requirements.

Lenders Specializing In Home Loan With Bad Credit

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Borrowers seeking a home loan with bad credit are in luck. Many lenders like myself specialize in helping home buyers with bad credit. Gustan Cho Associates is a national mortgage company with no overlays on government and conventional loans. If borrowers get approve/eligible per DU FINDINGS and LP FINDINGS.

Borrowers can get approved if they can satisfy all conditions on AUS. Mortgage lenders have also loosened up mortgage standards on past prior credit. Just a couple of years ago, it was unheard of for lenders to accept borrowers with outstanding judgment and tax lien.

Qualifying For A Mortgage With Judgment And Tax-Lien

Have made at least three timely payments

Now, most will accept borrowers with outstanding judgments and tax liens as long as they have the following:

  • A written payment agreement  with judgment creditor and Internal Revenue Service in force
  • Have made at least three timely payments
  • Can you provide canceled checks for those three payments
  • Mortgage lenders are more understanding of 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

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Most lenders have their own overlays on collection and charged-off accounts. To fund the mortgage loan, borrowers must have outstanding collections and charged-off accounts paid off before or at closing. Lenders are so paranoid about outstanding unsatisfied collection accounts 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 pay. However, FHA has implemented new collection account guidelines where 5% of the outstanding collection balance must be used to calculate 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 $2,000 or greater balances.

Best Mortgage Lenders For Bad Credit

Borrowers who need to qualify for non-QM loans or bank statement loans for self-employed borrowers can contact Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at We are available seven days a week, evenings, weekends, and holidays.

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