NON-QM Mortgage Rates And Terms Versus Traditional Rates


NON-QM Mortgage Rates And Terms Versus Traditional Rates

This BLOG On NON-QM Mortgage Rates And Terms Versus Traditional Rates Was UPDATED On November 28th, 2018

Mortgage rates has been increasing the past year.

  • The trend seems like mortgage rates will continue to rise
  • 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
  • However, with the launch of the new NON-QM Loans, there are 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 4.0% and into 5.0%
  • 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 home buyers 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 are more demand for homes than there are inventory
  • This creates rising in home prices
  • Now home buyers with 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 benefit 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 a 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 like 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
  • 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

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 loan 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 homeowner with a FHA Loan,  the borrower will be paying 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 for a slightly higher mortgage rate

A great advantage with 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 faster response. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho NMLS ID 873293

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