Non-Qualified Mortgage Products

Non-Qualified Mortgage Products and Lending Guidelines

Gustan Cho Associates are mortgage brokers licensed in 48 states

This article is about Non-qualified mortgage products and lending guidelines: Non-QM loan programs make qualifying for a mortgage possible for those who cannot qualify for a traditional government and/or conventional loan. In this article, we will cover the following topics: The regulation aspect of non-qualified mortgage products. How does non-QM versus traditional loan programs work. Benefits of non-QM mortgages. Thanks to non-QM and alternative financing, many homebuyers who could not qualify for a mortgage can now qualify. We will detail how non-QM loans work in this article.

What Are Non-QM Mortgage Products

Non-QM mortgage products refer to mortgage loans that don’t meet the standards set by the Consumer Financial Protection Bureau’s Qualified Mortgage (QM) rule. Non-QM mortgage products are typically designed for borrowers who do not meet the requirements for traditional QM loans but are still creditworthy and capable of repaying the loan. Non-QM mortgage products often cater to self-employed individuals, investors, or those with unique financial situations. Here are some common types of non-QM mortgage products:

Bank Statement Loans

These loans allow self-employed borrowers to qualify based on their bank statements rather than traditional income documentation.

Interest-Only Mortgages

With interest-only mortgages, borrowers can pay only the interest for a certain period, typically five to ten years, before beginning to pay both principal and interest.

Asset-Depletion Loans

This type of loan considers a borrower’s assets, such as savings, investments, and retirement accounts, as a source of income to qualify for a mortgage.

Jumbo Loans

Jumbo loans exceed the conforming loan limits Fannie Mae and Freddie Mac set. While some jumbo loans can be QM-compliant, others may fall under non-QM due to higher loan-to-value ratios or non-standard underwriting criteria.

Alternative Documentation Loans

 These loans allow borrowers to use alternative forms of income documentation, such as bank statements, rental income, or asset-based income, instead of traditional pay stubs or tax returns.

Non-Warrantable Condo Loans

Non-warrantable condos are condominium units that do not meet the guidelines for conventional financing due to various reasons, such as high investor ownership, pending litigation, or insufficient reserve funds. Non-QM loans may be available for these properties.

Foreign National Loans

Designed for non-U.S. citizens or residents, these loans allow foreign nationals to purchase property in the United States without traditional income documentation.

Fix-and-Flip Loans

These short-term loans are used by real estate investors to purchase and renovate properties to resell them for a profit quickly.

Debt-Service Coverage Ratio (DSCR) Loans

DSCR loans focus on the property’s ability to generate enough income to cover the mortgage payments rather than relying solely on the borrower’s income. It’s important to note that while non-QM loans offer flexibility, they often come with higher interest rates and stricter terms than conventional QM loans. Before choosing one, borrowers should thoroughly understand the terms and risks associated with non-QM mortgage products. Lenders offering non-QM products may also have varying eligibility requirements and underwriting standards.

Apply for non-qm loan with us, click here

Regulation of Non-QM Loans

There has slowly been a recent trend creeping back into the market regarding non-qualified mortgage products. These products are mortgage loans not sold to the government on the secondary marketplace. Hence not subject to certain debt-to-income criteria and federal mortgage lending guidelines. Non-Qualified Mortgage Products does not have to meet government guidelines imposed on mortgage lenders to adhere to or be forced to pay fines and or repurchase loans. These loans often referred to as non-QM loans, have become increasingly popular in recent years.

How Do Non-Qualified Mortgage Products Work

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Some of these mortgages are CRA related: In other words, they require the banks to do a certain number of loans in the community they are branched in. Those mortgage loans may have the following issues:
  • recent bankruptcy
  • high debt to income due to the person being self-employed
  • or the spouse cannot be on the loan due to low credit scores

One other aggressive criteria returning is the ITIN program, which allows people who are undocumented but pay taxes through a social given to them for filing purposes(usually begins with a 9 or a 5): The people who met these criteria may be able to buy with a decent down payment. Rates on all mortgages are higher than the standard market. Some may be on ARM, not 30 year fixed rates. It does show Wall Street and community lending is making a comeback.

Drawbacks of Non-Qualified Mortgage Products

Some potential pitfalls to the mortgage lending market include but not limited to: rising cost of lending due to compliance. This will raise the cost to the borrower, and slow the process down for them. The CFPB (consumer financial protection bureau) answers to no one. They are heavily funded through fines and punishments they impose. CFPB rewards whistle-blowers. Spreads on bonds are very low right now. Rates have benefited as a result. Fence-sitters should take comfort in borrowing money. But be aware low inventory will continue to raise prices higher than normal. So buy now before everyone else jumps in come warmer weather.

Non-Qualified Mortgage Products Offered Today

Non-Qualified mortgages are often referred to as non-QM loans. Bank statement loans for self-employed borrowers are non-QM loans. Gustan Cho Associates Mortgage Group offers non-QM loans where there is no waiting period after a housing event or bankruptcy. Homebuyers can qualify for non-QM loans one day out of foreclosure and/or bankruptcy.  Non-QM loans requires A 10% to 30% down payment. The amount of down payment depends on borrowers’ credit scores. Mortgage rates depend on the down payment the buyers put down and the borrower’s credit scores. Click here for non-qualified mortgage loan with us

PMI Requirement on Non-QM Loans

What ineligible mortgage products are currently offeredNon-QM loans do not require private mortgage insurance. This holds true no matter how high the loan to value is. There is no maximum loan limit on non-QM loans. Bank statement loans for self-employed borrowers do not require income tax returns. Self-employed borrowers can qualify for a mortgage, especially jumbo loans, with no tax returns. We average 24 months bank statement deposits and use the monthly average over 24 months as income. The debt to income ratio can be up to 50% DTI. There are no loan limit caps. Debt to income ratios can be as high as 50%. Call or text us at 800-900-8569 or text us for a faster response. Or email us at for more information on our non-QM loan programs and bank statement loan for self-employed borrowers.

About The Author

Ron Granado is a senior writer for Gustan Cho Associates Commercial And Residential Mortgage Information Center and a veteran title expert. Ron Granado of Plymouth Title Guaranty Corporation is based in Oak Brook, Illinois. He is an expert in all areas of commercial and residential title policies and how titles work. Mr. Granado is a consultant to many real estate attorneys, real estate agents, mortgage professionals, mortgage lenders, banks, credit unions, and consumers. If you have any questions on the property title or need the best title officer to represent your real estate transaction, contact Ron.

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