NON-QM Mortgage Rates And Terms Versus Traditional Rates
This Article Is About NON-QM Mortgage Rates And Terms Versus Traditional Rates:
Mortgage rates have been at historic lows the past year. The trend seems like mortgage rates will continue to rise in the coming months into 2022. With mortgage rates rising, normally there is a slowdown in home purchases. However, housing demand remains strong throughout the United States and there are no signs of a slowdown in the imminent future. Many home buyers who are ready to purchase homes now cannot qualify with government and/or conventional loans due to not meeting the mandatory waiting period after foreclosure or bankruptcy.
With the launch of the new NON-QM Loans, there is no waiting period after a housing event and/or bankruptcy. NON-QM Mortgage Rates are normally higher than government and conventional loans. However, with traditional mortgage rates rising, non-QM mortgage rates do not seem as high as it once was.
Rising Interest Rates And Attractiveness Of NON-QM Loans
Both government and conforming mortgage rates have been rising for the past 18 months with no signs of correction.
Mortgage rates are in the high 2.0% and into the 3.0%. Some mortgage borrowers with lower credit scores and loan pricing adjustments due to higher debt to income ratios are now paying points. Until recently, most homebuyers who did not meet the waiting period requirements after foreclosure, deed in lieu of foreclosure, short sale were blocked out of the housing market.
There is more demand for homes than there is inventory. This creates a rise in home prices. Now home buyers with a 10% to 20% down payment are eligible to purchase homes with non-QM loans rather than waiting out the waiting period requirements on government and conventional loans. NON-QM Loans have no private mortgage insurance requirements.
Lower credit score borrowers can get better benefits with non-QM loans than they can with traditional mortgage loans.
30 Year Fixed Mortgage Rates
If you are a prime borrower with at least a credit score, 20% or more in equity, or 20% or more down payment on a home purchase, and conforming debt to income ratios, you can most likely lock your mortgage rate at a good interest rate. Those with lower credit scores, higher loan to value, higher debt to income ratios, will most likely get rate adjustment and pay higher mortgage rates. For prime credit 15 year fixed mortgage borrowers, the current mortgage rates are even lower. These mortgage rates are national averages and vary from state to state.
FHA and VA loans are not as credit score sensitive as conventional loans. This is because these loans are backed by the Federal Housing Administration and the Department of Veterans Affairs respectively. However, if borrowers’ credit scores are lower than 640, then government loans will have Loan Level Pricing Adjustments (LLPA).
NON-QM Mortgage Rates And Down Payment Requirements
10% to 20% down payment is required on NON-QM Loans.
- 10% down payment on home purchase on 680 credit scores.
- 15% down payment on 660 credit score.
- 20% down payment on under 660 credit scores.
- Non-QM mortgages one day out of bankruptcy and/or foreclosure require a 30% down payment.
- No private mortgage insurance on non-QM loans.
- No loan limit caps on non-QM mortgages.
NON-QM Mortgage Rates are based on the following:
- credit scores
- down payment
- seasoning from housing event
- type of property
Refinancing NON-QM Loans To FHA Or Conventional Loans
Homeowners with non-QM loans can think about refinancing current NON-QM Mortgage to FHA or Conventional loans to see if they can get a lower interest rate.
- Borrowers can also think of refinancing their FHA to Conventional Loans to eliminate the high cost of FHA’s annual mortgage insurance premium
- FHA annual mortgage insurance premium is 0.85% of the mortgage balance
- For a homeowner with an FHA Loan, the borrower will be paying an FHA mortgage insurance premium, no matter how low the loan to value is
- There is private mortgage insurance required for conventional loans with higher than 80% loan to value
- However, private mortgage insurance can be canceled if the property has at least 80% Loan To Value
There is also Lender Paid Mortgage Insurance, also known as LPMI:
- The homeowner does not pay mortgage insurance even if their loan to value is higher than 80% in lieu of a slightly higher mortgage rate
A great advantage of non-QM mortgages is that no private mortgage insurance is required.
Home Buyers who need to qualify for NON-QM Mortgage or Bank Statement Loans For Self Employed Borrowers, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.