NON-QM Mortgage Processing Versus Traditional Home Loans

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This BLOG On NON-QM Mortgage Processing Versus Traditional Home Loans Was PUBLISHED On May 7th, 2019

NON-QM Loans are alternative financing mortgage programs.

  • Borrowers who do not meet government and/or conforming mortgage guidelines can now qualify for non-qm loans
  • NON-QM Loans are not insured by any government agencies
  • They also do not need to conform to Fannie Mae and/or Freddie Mac Lending Guidelines
  • There is no waiting period after bankruptcy and/or housing event to qualify for non-qm loans
  • Down payment requirements are between 10% to 20%
  • There is no maximum loan limits and no private mortgage insurance required
  • Self-employed borrowers can qualify for bank statement non-qm loans with no income tax return required
  • NON-QM Mortgage Processing and Underwriting is similar to traditional home loans

In this blog, we will discuss NON-QM Mortgage Processing and Underwriting versus traditional government and conventional loans. NON-QM Loans are becoming more popular in today’s hot real estate market.

Understanding NON-QM Mortgage Processing

Understanding NON-QM Mortgage Processing, Underwriting, Funding, and Closing Process will give borrowers some insight into the steps involved to close. There are many moving parts on non-qm loans since they are portfolio loans. Lenders take on more risk on non-qm loans since they are not insured by any government agencies and cannot sell these loans to Fannie/Freddie after it closes.

Here is the basic NON-QM Mortgage Process and the parties involved:

  • The buyer gets pre-approved by a lender and enters into a real estate purchase contract
  • The borrower needs to submit all documents including executed real estate purchase contract
  • The buyer puts the down payment earnest money check with seller’s agent and/or title company
  • The mortgage process officially starts once the borrower e-signs the loan application
  • The file gets assigned to a mortgage process
  • The mortgage processor makes sure that all docs are complete and there are no missing pages
  • The borrowers will get notice by the mortgage processor if there are any documents required 
  • The processor’s job is to prepare the file for the mortgage underwriter

An experienced mortgage processor will not submit a file to underwriting until the file is complete.

Mortgage Underwriting

Our team at Gustan Cho Associates will know whether a borrower qualifies for a particular non-qm mortgage program.

  • We will not waste and/or stress a borrower’s time and issue a pre-approval and start the mortgage process if we have an ounce of doubt the borrower does not meet mortgage guidelines
  • NON-QM Mortgage Processing is similar to government and conventional loans
  • However, it can be somewhat easier than traditional government and/or conventional loans since non-qm loans are portfolio loans
  • Lenders do not sell these loans nor do they have to worry about being insured by FHA, VA, USDA
  • NON-QM Lenders can make exceptions and underwrite each file on a case by case basis
  • Mortgage Underwriters have a lot of underwriting discretion when underwriting non-qm mortgages
  • For example, the maximum debt to income ratio on non-qm loans is 50% with compensating factors
  • However, mortgage underwriters can make a decision in exceeding the debt to income ratio if the borrower shows strong compensating factors

Automated Underwriting System Approval is not required on non-qm mortgages.

Steps Taken After Conditional Loan Approval

Once a borrower gets a conditional loan approval, the file gets back to the mortgage processor. The home appraisal is ordered at this time. The mortgage processor and loan officer then needs to gather the conditions to re-submit to the underwriter. Processors will not submit conditions piecemeal. Once all the conditional are gathered and complete, the processor will then submit the file to underwriting for a clear to close. Once all conditions are satisfied, the underwriter will issue a clear to close.

As you can see, the non-qm mortgage processing steps are similar to government and conventional loans. One difference is that non-qm mortgages are less strict because mortgage underwriters can make exceptions.

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