Non-QM Loan Requirements and Mortgage Options

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Non-QM loan requirements depend on the mortgage loan program. There are so many non-QM mortgage options on owner-occupant homes, second homes, and investment properties. Gustan Cho Associates are mortgage brokers licensed in 48 states with a lending network of 210 wholesale lenders.

Gustan Cho Associates has dozens of non-QM mortgage loan programs for homebuyers of primary and second homes, and real estate investors. Besides non-QM loans. There is no non-QM mortgage loan program Gustan Cho Associates does not have.

Gustan Cho Associates has added specialty and alternative mortgage loan programs for our borrowers. One of the recent new non-QM mortgage loan products we added is the no-doc home loans for primary homes. We will cover and discuss the updated non-QM mortgage products now available and the non-QM loan requirements on the most popular loans.

What is Non-QM Mortgage Loan?

What is a non-QM (non Qualified Mortgage) loan and how can it help you? Non-QM loans are products designed to help with specific home financing problems. Bank statement mortgages, asset depletion products, and non-prime loans are all non-QM.

Some of our common non-QM mortgage loan programs include bank statement loans, no-doc loans, stated-income loans, no-ratio mortgages, 1099 only income mortgages, asset-depletion loans, P and L statement only mortgages, and dozens of other alternative lending loan programs.

Non-QM loans can be very helpful for those with hard-to-verify income or credit issues. Because non-QM home loans are not standardized, rates and guidelines can vary widely. Non-QM loan requirements are not uniform like agency mortgage guidelines on government and conventional loans. One lender can have lower non-QM loan requirements than another non-QM lender. That can make shopping for these loans a challenge.

Prequalify for a non-QM loan in about 5 minutes.

Benefits Of Using Non-QM Loans Versus Traditional Mortgages

The term “non-QM” simply means that a loan is not a qualified mortgage (QM). Qualified mortgages are loan products that the federal government Non-QM Loans are alternative mortgage loan programs.

Non-QM mortgage lenders can make exceptions and change terms of their non-QM mortgage guidelines on a case by case scenario. For example, non-QM mortgage lenders can waive verification of rent guidelines, loan-to-value, reserve requirements, credit tradelines, and late payment exemptions.

Non-QM loans are loan programs that benefit borrowers who either cannot qualify for traditional mortgage loan programs. Non-QM loans are not just loans for bad credit borrowers.

Non-QM Loan Requirements On Credit Scores

Many non-QM borrowers have high credit scores and high net worth. However, many borrowers may not benefit from traditional government and/or conventional mortgages due to one of many reasons. It can be due to the maximum loan limit. Or it may be due to not having a steady income or no income but having a high net worth. High net-worth individuals with a lot of assets may qualify for our non-QM asset-depletion loan program but not qualify for a traditional mortgage. In this article, we will discuss and cover non-QM mortgages and alternative financing loan programs.

What is the DTI for a Non-QM Loan?

Qualified Mortgages (QMs) generally have stricter debt-to-income ratio requirements than non-qualified mortgages (non-QMs). Lenders typically require a DTI of 43% or lower for QMs, while non-QMs are not subject to the strict guidelines of the Consumer Financial Protection Bureau (CFPB).

Lenders and loan products can have varying DTI ratios for non-QMs. QMs usually require a DTI ratio of 43% or lower. Non-QMs are not bound by the strict guidelines of the Consumer Financial Protection Bureau (CFPB). The debt-to-income ratio, or DTI, differs for all non-qualified mortgages (non-QMs) and can be influenced by the particular loan product and the lender.

Instead, non-QM loans are designed for borrowers who may not meet the traditional QM criteria but still can repay the loan based on other factors such as substantial assets, high income, or unique financial circumstances. As a result, the DTI ratio for a non-QM loan can be higher than 43%, and some non-QM lenders may offer loans to borrowers with DTI ratios exceeding 50% or even higher.

To ensure the most suitable non-QM loan option is found, borrowers are advised to compare offers from multiple lenders while taking note of varying DTI requirements and eligibility criteria. It is also recommended to seek the assistance of a mortgage broker or financial advisor to navigate the non-QM loan market based on individual financial circumstances.

Benefits Of Non-QM Loans Versus Traditional Mortgage Loan Programs

Non-QM Mortgages And Alternative Financing Programs are in full force. Non-QM loans have become increasingly popular prior to the coronavirus outbreak in February 2020. However, once the pandemic hit the United States, all non-QM wholesale mortgage lenders suspended their operations. This included borrowers who got conditional loan approvals as well as clear to close.

Not all non-QM wholesale lenders have the same lending requirements. Non-QM loan requirements are different depending on the loan program and the lender. Every mortgage company has its own non-QM loan requirements on each loan product.

In March 2020, all non-QM loans were suspended from origination, processing, underwriting, and closing until further notice. Liquidity issues in the secondary mortgage markets were a major concern. However, there are a handful of non-QM wholesale lenders that re-opened operations. Gustan Cho Associates has wholesale lending partnerships with almost every single non-QM wholesale lender. If there is a non-QM and/or alternative financing mortgage program in the marketplace, Gustan Cho Associates has it.

Non-QM Mortgages And Alternative Financing Programs Look Promising

After the coronavirus outbreak hit the nation, many non-QM lenders went out of business within weeks of the pandemic. Others permanently closed their doors. Non-QM loans were the hottest mortgage loan program prior to the COVID-19 pandemic. Ronda Butts of Gustan Cho Associates explains what non-QM loans are:

Non-QM mortgages are not hard money loans. They are portfolio loans with competitive mortgage rates. Non-QM loans are a great alternative mortgage loan program for borrowers who cannot qualify for government and conventional loans.

Non-QM and other alternative mortgage programs are portfolio loans and have no set uniform guidelines like government and conventional loans. Borrowers who are shopping for non-QM loans will need to ask for the lender’s eligibility requirements depending on the mortgage program. Click here to get qualify for a non-QM loan

Non-QM Loan Requirements On No-Doc Home Loans

No-doc mortgage loans were the most popular used mortgage program prior to the 2008 financial crisis. No-doc loans are now back in full force. No income tax returns or income documentation is required on non-QM loans.

No-doc mortgage loans is now available at Gustan Cho Associates for primary homes, second homes, and investment properties. No-doc mortgage loans means no income documentation or income tax returns is required. Only the down payment, credit scores, and one month bank statements is required. Reserves is required on no-doc loans.

Gustan Cho Associates offers no-doc loans on primary homes. Requires a 20% down payment and a minimum 660 credit score. No-doc mortgages were the most popular loan program prior to the 2008 financial crisis. We now have no-doc home loans in full force for borrowers who do not have qualified income and need stated-income mortgages.

Non-QM Loan Requirements On Bank Statement Mortgages

12 and 24-month bank statement mortgages are for self-employed borrowers and/or business owners. Federal income tax returns are not required. Non-QM wholesale mortgage lenders will average the past 12 months of bank statement deposits. The average monthly deposit over the past 12 months is the income used for the borrower. Withdrawals do not matter. There are two different types of bank statement mortgages. The 12-month and 24-month bank statement mortgage loan program.

Non-QM Loan Requirements On Down Payment And Credit Scores

The 12-month bank statement mortgage program requires a 20% down payment or 80% loan-to-value. For borrowers who want to put less than a 20% down payment or higher than an 80% loan-to-value, then they may want to consider the 24-month bank statement mortgage program. Gustan Cho Associates offers rate and term non-QM refinance at 90% loan-to-value with a 720 credit score. Homeowners can do an 80% loan-to-value cash-out refinance with a 740 credit score with non-QM loans. There is no maximum loan limit on non-QM loans. There is no private mortgage insurance required on non-QM loans.

What is a QM Test in Mortgage?

The Qualified Mortgage (QM) test in mortgage lending is a set of criteria established by the Consumer Financial Protection Bureau (CFPB) to determine if a mortgage loan qualifies as a QM loan. This test evaluates several key factors, including the borrower’s debt-to-income ratio (DTI), which typically must not exceed 43% for most QM loans.

QM loans limit the amount of points and fees charged to the borrower, restrict certain loan features like interest-only payments and balloon payments, and generally have a maximum term of 30 years. Lenders must also thoroughly document and verify the borrower’s financial information to ensure they can repay the loan.

Meeting the QM test is crucial for lenders as it provides legal protections under the Ability-to-Repay (ATR) rule, reducing the risk of litigation related to ATR violations. Borrowers benefit from QM loans as they are designed to ensure affordability based on their income and financial circumstances, providing greater assurance of loan repayment.

Investor Series Non-QM Mortgages: Debt Service Coverage Ratio Loans

Gustan Cho Associates is affiliated with dozens of non-QM wholesale lending partnerships. Gustan Cho Associates has a national reputation for being a one-stop mortgage shop for having not just government and conventional loans with no lender overlays but dozens of non-QM loan programs. If there is a non-QM mortgage program in today’s marketplace, Gustan Cho Associates probably already has it:

• No limit on the number of financed properties
• However, our non-QM wholesale investor will only finance $5 million in aggregate dollar amount
• Any aggregate loan size higher than the $5 million aggregate dollar amount will be evaluated on a case-by-case scenario
• Investor products do not require landlord/rental history
• Vested as LLC or Corporation is acceptable.
• Purchase
• Rate and Term Refinance up to 80% LTV with 720 credit scores
• Cash-out refinance up to 75% LTV with a 720 credit score
• Must meet 115% of rental income to PITIA in qualifying

Non-QM and alternative mortgage loan programs are for owner-occupants, second homes, and investment property financing.

Full Doc Non-QM Mortgages Up To $4 Million Loan Amounts

Full Doc Non-QM Mortgages:

• 1 year of income documentation for full doc programs
• Purchases
• Rate and Term Refinance up to 90% LTV with 720 scores
• Cash-out refinance up to 80% LTV with a 700 credit score

Near Prime Jumbo Mortgages:

• Purchase
• Rate and Term 740 credit score up to 90% LTV up to $1.5 million dollar loan amount
• 700 credit score up to 90% loan-to-value up to $1 million dollar loan amount
• 40% DTI at 90% LTV
• 43% debt-to-income ratio up to 85% loan-to-value or less
• 80% LTV or less 6 months reserves
• 80-85%  loan-to-value requires 9 months of reserves
• 86-90%  loan-to-value requires 12 months of reserves
• For every additional finance property, 6 months of reserves for each other financed property

Non-QM Loan Requirements On Asset-Depletion Loans

Asset Depletion Loan Program:

• 90 days seasoned, 100% of the value, divided by 60 months for monthly income
• Purchase
• Rate and Term Refinance at 80% LTV with a 680 credit score
• Cash-out refinance up to 75% LTV with a 720  credit score
• Must have 110% in assets of the loan amount plus reserve requirements
• Gifts are not allowed on this mortgage loan program

Fannie Mae only – C1 conventional Agency:

• Minimum 620 credit score
• Must have approved findings
• No manual underwriting
• 95% maximum loan-to-value

Cash-out transaction cashback can be used toward 3 of the 6 months of reserves requirement, except E1:

• 10-year Interest-Only period available (40-year total term)
• NO credit event in the last 24 months
• If the borrower had a credit event in the past 24-48 months, then the maximum loan-to-value is lowered to 65% LTV, and the reserve requirements are increased by 6 months
• Non-Warrantable Condos up to 85%
• Condotels up to 70% LTV
• 100% gift allowed on primary home mortgage loans
• The gift allowed investment  property financing with the borrower putting down 5% of their own funds
• 6  months of reserves on  up to a maximum of $2 million loan amount
• Over $2 million in loan amounts require 12 months of reserves
• 1X30 on mortgage from last 6 to 12 months
• 0X30 for most previous 6 months
• Up to 50% DTI, except E1 max 40-43% and C1 whatever approved eligible findings per automated underwriting system (AUS) allow
• Transferred appraisals accepted

The minimum loan amount is $100k min loan amount. The maximum loan amount is $4,000,000. Loan amounts greater than $4 million dollars can be done in a case-by-case scenario.

Non-QM Loan Requirements One Day Out Of Foreclosure And Bankruptcy

Prior to the coronavirus outbreak hitting the nation back in February 2020, most non-QM wholesale lenders did not have any waiting period requirements after bankruptcy and/or a housing event. However, after non-QM wholesale lenders reopened their operations, many non-QM wholesale lenders have implemented new waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, and short sale.

The non-QM mortgage market is getting stronger as time pass. More and more homebuyers and real estate investors are opting for non-QM loans due to traditional lenders being very strict on qualified income and income sourcing.

Gustan Cho Associates has non-QM wholesale lenders that do not have any waiting period requirements after bankruptcy and/or a housing event.  The 2023 housing market is expected to be stronger than in 2022 with no correction in sight. Non-QM loans are great alternative financing solutions for owner-occupant, second homes, and investment property mortgage loans. Click here to  find alender that don’t have waiting period requirements

FAQ: Non-QM Loan Requirements and Mortgage Options

• 1. What is a Non-QM Mortgage Loan? A non-QM (Qualified Mortgage) loan is designed for borrowers with specific home financing challenges, offering flexibility and catering to those with hard-to-verify income or credit issues. These loans include various programs such as bank statement mortgages, no-doc loans, and stated-income loans.
• 2. What Are the Benefits of Using Non-QM Loans Versus Traditional Mortgages? Non-QM loans provide flexibility and can benefit borrowers who don’t qualify for traditional mortgages due to income, credit, or property type reasons. Lenders offering non-QM loans can make exceptions and adjust terms based on individual circumstances.
• 3. What are the non-QM loan requirements for credit scores? Non-QM loan requirements on credit scores vary but generally offer more flexibility than QM loans. Despite non-traditional income sources, borrowers with high credit scores and net worth may still qualify for non-QM loans.
• 4. What is the Debt-to-Income (DTI) Ratio for a Non-QM Loan? Non-QM loans can have higher DTI ratios than QM loans, with some lenders offering loans exceeding 50% DTI. The DTI requirement depends on the lender and loan program, considering factors like income, assets, and unique financial circumstances.
• 5. What Are Some Non-QM Loan Programs Available? Non-QM loan programs include bank statement mortgages, no-doc loans, stated-income loans, and others, catering to owner-occupant homes, second homes, and investment properties.
• 6. What is a QM Test in Mortgage? The Qualified Mortgage (QM) test determines if a mortgage loan qualifies as a QM loan, offering legal protections to lenders. The test evaluates factors like DTI ratio, points and fees, loan features, and underwriting documentation to ensure affordability and borrower repayment ability.
• 7. Are Non-QM Loans Available for Real Estate Investors? Yes, non-QM loans are available for real estate investors, offering alternative financing options tailored to investor needs, such as debt service coverage ratio loans, asset-depletion loans, and specialized products for rental properties and fix-and-flip projects.

This blog about Non-QM Loan Requirements and Mortgage Options was updated on March 21st, 2024.

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