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