NON-QM Mortgage Rates And Terms Versus Traditional Rates

NON-QM Mortgage Rates Compared To Conforming Loans

Gustan Cho Associates are mortgage brokers licensed in 48 states

There is no doubt that non-QM mortgage rates are higher than rates on traditional loans. 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 people assume non-QM mortgage rates are high. Non-QM mortgage rates are not bad. All rates, including non-QM mortgage rates, are based on the layered risks posed to the lender. The more the risk to the lender, the higher the pricing hits which means the higher the non-QM mortgage rates.

Competitive non-QM Mortgage Rates

Non-QM Loans After Bankruptcy and Foreclosure

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.

Non-QM Mortgage Rates Benefit Homebuyers Who Are Waiting Out  The Qualified Date After Bankruptcy and Foreclosure

Skyrocketing Home Prices and Inflation Rates, Make Non-QM Mortgage Rates More Attractive

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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, and short sale were blocked out of the housing market.

Homebuyers Recovered From Recent Bankruptcy and/or Housing Event No Longer Have To Meet Waiting Requirements To Purchase A Home

There is more demand for homes than there is inventory. This creates a rise in home prices. Now home buyers with a 10% to 30% 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 scores or self-employed borrowers can benefit from non-QM loans more than they can from traditional mortgage loans.

How Mortgage Lenders Price 30 Year Fixed Traditional Loans Versus Non-QM Mortgage Rates

If you are a prime borrower with at least a credit score, 20% or more in equity, or 20% or the 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, and higher debt to income ratios, will most likely get rate adjustment and pay higher mortgage rates.

Non-QM Mortgage Rates Are Regulated: Non-QM Loans Are Not Hard Money Loans

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 30% 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.

Factors That Affect The Pricing Of Mortgage Rates On Non-QM Loans

NON-QM Mortgage Rates are based on the following:

  • credit scores
  • down payment
  • seasoning from housing event
  • type of property

Pricing on non-QM Mortgage Rates

Refinancing NON-QM Loans To FHA Or Conventional Loans

Homeowners with non-QM loans can think about refinancing current NON-QM Mortgage Rates 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’s 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.

Conventional Rates With Private Mortgage Insurance versus no PMI on Non-QM Loans

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 an 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.

Non-QM Mortgage Rates and Options For Owner-Occupant Homes: Second Homes, Investment Properties

Non-QM and alternative financing loan programs are becoming to be the most popular mortgage program in the nation. Like conventional loans, non-QM loans are for both owner-occupant primary homebuyers and real estate investors. There are dozens of non-QM loan programs for real estate investors. Non-QM loans are not just for bad credit mortgage borrowers. Many self-employed high credit profile borrowers benefit from non-QM loans. In this article, we will discuss and cover non-QM loans one day out of bankruptcy and foreclosure.

See Today’s non-QM Mortgage Rates and Terms

Bad Credit Versus Timely Payment In The Past 12 Months

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Mortgage borrowers can qualify for home loans with prior bad credit but need to have been timely on all of their payments in the past 12 months. Borrowers can qualify for home loans after bankruptcy, foreclosure, short sale, and deed in lieu of foreclosure. However, government and conventional loans require a mandatory waiting period after the credit event. The good news we have is that Gustan Cho Associates now offers non-QM loans with recent credit events. This holds true for both purchase and refinance transactions. We will cover NON-QM Loans With Recent Credit Events and what type of borrowers can benefit from this loan program. 

Gustan Cho Associates NON-QM Mortgage Rates: Get a Quote

What Are Examples Of Recent Credit Events?

Recent credit events are the following:

  • Foreclosure, deed in lieu of foreclosure, short-sale that has not been seasoned three years
  • Recent late payments in the past 12 months on credit tradelines
  • Bankruptcy in the past two years
  • Recent collections/charge-offs
  • Other extenuating circumstances lead to late payments and not paying bills on time

The above extenuating circumstances happen to the best of us. Divorces can be brutal. The majority of folks who go through a recent divorce often have their credit bruised. Death in the family is another extenuating circumstance that affects household income and credit. Job loss, business loss, and company takeovers are other reasons. Regardless of the reason, the good news we have is that we now offer NON-QM Loans With Recent Credit Events. Until now, borrowers with recent late payments could not have qualified for a mortgage. With our new NON-QM Loans With Recent Credit Event, borrowers can qualify for a home loan now rather than later. Once they have their credit re-established, we can then refinance them into a traditional government and/or conforming loan.

Types Of Borrowers Who Can Greatly Benefit From NON-QM Loans With Recent Credit Event

Home prices are rising in all areas of the United States

Home prices are rising in all areas of the United States. The Federal Housing Finance Agency (FHFA) increased conforming limits to $548,250 on conventional loans. FHFA increased conventional loan limits for three years in a row due to rising housing prices. HUD, the parent of FHA, followed the FHFA lead and raised FHA Loans Limits to $356,362 for 2021. Again, HUD increased FHA Loan Limits for three years in a row due to rising home prices. Mortgage rates keep on rising to the great economy. With rates still rising, the housing demand remains high.

Non-QM Mortgage Rates Not Too Much Higher Than Conforming Rates

There does not seem a housing correction is going to happen in the near future. All statistics and economic data suggest that housing prices will continue to climb. Many homebuyers who recently had a housing event or recent credit event cannot take advantage of the housing boom with traditional government and conventional loans. Now with NON-QM Loans, these types of home buyers can qualify for a mortgage and do not have to wait many years when they are priced totally out of the market.

NON-QM Loans With Recent Credit Events Such As Recent Divorce

On the refinance side, many homeowners enjoyed their homes appreciate in recent years due to the housing boom. However, most divorces can affect people’s credit. There are instances where one spouse will get the home but only has a certain amount of time to get their names out of the mortgage note. With non-QM loans, homeowners with recent bad credit can qualify for a cash-out refinance.

Non-QM Credit Requirements

The amount of cash-out is dependent on the equity homeowners have in their homes. On the flip side, homeowners with recent credit events due to a divorce may want to purchase a new home rather than rent. Cases like these often happen where people need to purchase versus rent due to having children or many pets. Again, home buyers with recent credit events can now qualify for non-QM loans rather than waiting years to qualify for government-backed and/or conventional loans.

NON-QM Loans With Recent Credit Event Mortgage Guidelines

Non-QM Loans are becoming increasingly popular.

Basic eligibility requirements are as follows:

  • No waiting period after the housing event
  • No waiting period after bankruptcy for qualified individuals
  • 10% to 20% down payment is required
  • The amount of down payment depends on borrowers’ credit scores and the longevity of the credit event
  • Mortgage rates depend on borrowers’ credit scores, down payment, and longevity of credit event
  • There is no loan limit
  • There is no private mortgage insurance required
  • Bank statement loans for self-employed borrowers are available

For more information on our non-QM loans with recent credit events, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at Special thanks to our SVP Dale Elenteny and NON-QM Investor Jack Kotowski for their video/blog presentation to educate our loan officers and our viewers. 

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