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Reason Using Non-QM Versus Traditional Mortgages For Borrowers

Gustan Cho Associates
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Reason Using Non-QM Versus Traditional Mortgages For Borrowers

This BLOG On Reason Using Non-QM Versus Traditional Mortgages For Borrowers Was PUBLISHED On July 16th, 2019

Reason Using Non-QM Versus Traditional Mortgages
Gustan Cho Associates

The most common traditional mortgage program today are FHA and Conventional Loans. Government Loans are home loans originated and funded by lenders that are insured by the government. There are three types of government loans:

  1. FHA Loans
  2. VA Loans
  3. USDA Loans

FHA Loans require 3.5% down payment for borrowers with at least a 580 credit score.

  • Borrowers under 580 FICO down to 500 credit scores are eligible for FHA Loans with 10% down payment. HUD is the parent of FHA.

VA and USDA Loans offers 100% financing.

  • To be eligible for VA Loans, the borrower needs to be an active and/or retired member of the U.S. Military with a Certificate Of Eligibility (COE)
  • Due to the government guarantee, lenders can offer government loans with little to no money down at very competitive mortgage rates

Conventional Loans are not guaranteed by the government.

  • Conventional Loans are called Conforming Loans
  • This is because they need to conform to Fannie Mae and/or Freddie Mac Guidelines
  • Lenders need to make sure all conventional loans conform to Fannie/Freddie Mortgage Guidelines if they want to sell the loans they fund to Fannie/Freddie after funding
  • Fannie Mae and Freddie Mac will not buy mortgages that do not conform to their lending standards
  • Due to its liquidity, borrowers can qualify for conforming loans with 3% to 5% down payment at very competitive rates

Non-QM Loans are portfolio loans.

  • Non-QM Mortgage Rates are higher than government and conventional loans
  • 10% to 20% down payment is required on Non-QM Loans
  • Reason Using Non-QM Versus Traditional Mortgages for borrowers are many

In this article, we will discuss the Reason Using Non-QM Versus Traditional Mortgages For Borrowers.

Not Meeting Waiting Period Requirements After Bankruptcy And Foreclosure

Borrowers who did not pass the minimum mandatory waiting period after bankruptcy and/or foreclosure on government and/or conventional loans is a Reason Using Non-QM Versus Traditional Mortgages.

  • Non-QM Loans have no waiting period requirements after bankruptcy and/or housing event
  • Home buyers can qualify for Non-QM Home Loans one day out of foreclosure, deed in lieu of foreclosure, short sale, bankruptcy. FHA, VA, USDA, and Conventional Loans

Conventional Loans have mandatory waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale.

Waiting Period Requirements After Bankruptcy And Housing Event On Government And Conforming Loans

Waiting Period Requirements After Bankruptcy And Housing Event On Government And Conforming Loans

Non-QM Mortgages have no waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. Government and Conventional Loans have a mandatory waiting period after bankruptcy and housing events.

Here are the waiting period requirements after bankruptcy and a housing event on government and conventional loans:

  • FHA and VA require a two year waiting period after a Chapter 13 Bankruptcy discharge date
  • There is a three year waiting period on FHA and USDA Loans after foreclosure, deed in lieu of foreclosure, short sale
  • There is a three year waiting period after bankruptcy to qualify for USDA Loans
  • There is a two-year waiting period to qualify for VA Loans after foreclosure, deed in lieu of foreclosure, short sale
  • Borrowers can qualify for VA and FHA Loans during Chapter 13 Bankruptcy repayment plan
  • There is no waiting period after Chapter 13 Bankruptcy to qualify for VA and FHA Loans
  • There is a four year waiting period on Conventional Loans after Chapter 13 Bankruptcy discharge, Chapter 13 dismissal date, deed in lieu of foreclosure, and short sale
  • The waiting period is 7 years after a standard foreclosure to qualify for conventional loans
  • There is a two year waiting period after Chapter 13 discharged date to qualify on conventional loans

Reason Using Non-QM Versus Traditional Mortgages is if borrowers did not meet the above waiting period guidelines on government and conforming loans.

Other Reason Using Non-QM Versus Traditional Mortgages

Other Reason Using Non-QM Versus Traditional Mortgages

Other benefits and reason using Non-QM Versus Traditional Mortgages are the following:

  • No maximum loan limits
  • No private mortgage insurance
  • Late payments in the past 12 months allowed
  • Credit scores down to 500 FICO
  • Bank statement loans for self-employed borrowers with no income tax returns required
  • Asset Depletion Loan Program where income is not an issue
  • Exceptions can be made on Non-QM Loans on a case by case basis

For more information about this article, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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