NON-QM Mortgage Processing

NON-QM Mortgage Processing Versus Traditional Home Loans

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers non-QM mortgage processing versus traditional home loans. NON-QM loans are alternative financing mortgage programs. Borrowers who do not meet government or conforming mortgage guidelines can now qualify for non-QM loans.  Government agencies do not insure NON-QM loans.  John Strange, a senior loan officer at Gustan Cho Associates, explains the non-QM mortgage processing versus traditional home loans:

Non-QM loans also do not need to conform to Fannie Mae or Freddie Mac Lending Guidelines. There is no waiting period after bankruptcy or housing event to qualify for non-QM loans. The down payment requirements on non-QM loans are between 10% to 30%.  There are no maximum loan limits and no private mortgage insurance is required on non-QM loans.

Self-employed borrowers can qualify for bank statement non-QM loans with no income tax return required. NON-QM Mortgage Processing and Underwriting are similar to traditional home loans. This blog 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

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Understanding NON-QM mortgage processing, underwriting, funding, and closing processes will give borrowers some insight into the steps involved in the closing. There are many moving parts on non-QM loans since they are portfolio loans. Lenders take on more risk on non-QM loans since government agencies do not insure them and cannot sell these loans to Fannie/Freddie after it closes. T

We will discuss the basic NON-QM Mortgage Process and the parties involved. The buyer gets pre-approved by a lender and enters a real estate purchase contract. The borrower must submit all documents, including the executed real estate purchase contract. The buyer puts the down payment earnest money check with the seller’s agent 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 ensures that all docs are complete and that there are no missing pages. The borrowers will get a notice from the mortgage processor if any documents are 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.

Types of Mortgage Loan Programs

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There are five different types of mortgage loan programs.

  • FHA loans
  • USDA loans
  • VA loans
  • Conventional loans
  • Non-QM loans

Gustan Cho Associates has a national reputation for not having any lender overlays on government and conventional loans. We are mortgage bankers with the ability to broker loans. We have over a dozen lending relationships with non-QM wholesale lenders.

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 or stress a borrower’s time, issue a pre-approval, and start the mortgage process if we doubt the borrower does not meet mortgage guidelines.

NON-QM Mortgage Processing is similar to government and conventional loans. It can be easier than traditional government 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, or 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. Mortgage underwriters can make a decision to exceed 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

The file returns to the mortgage processor once a borrower gets conditional loan approval. The home appraisal is ordered at this time. The mortgage processor and loan officer must 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 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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