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Non Qualified Loan
NONQUALIFIEDLOAN.COM
NONQUALIFIEDLOAN.COM
LENDER HOTLINE: 888-581-5008
Non-Qualified Mortgage Loan Guide for
Residential Property Buyers and Owners
There are two types of mortgages: qualified a...
What is a Qualified Mortgage?
A “qualified” mortgage (QM) means that the
borrower meets certain requirements pertaining to...
What is a Non-Qualified Loan?
A “non-qualified” loan (non-QM), on the other hand,
means that the borrower does not meet th...
Qualified Mortgage Rules
Understanding what makes a qualified mortgage will
help you determine if you fall into the non-qu...
If you do not meet all of these requirements, you
do not fall under the QM rules. This does not
mean you are automatically...
Going Beyond
Qualified Mortgage
Guidelines
NONQUALIFIEDLOAN.COM
LENDER HOTLINE: 888-581-5008
The Qualified Mortgage guidelines make it difficult
for certain borrowers to obtain a loan. Whether you
have a credit scor...
Lenders basically look for compensating factors
when accepting loans outside of the realm of the QM
guidelines. For exampl...
Non-Qualified Does not Mean
Not Able to Pay
What needs to be stressed here is that a non-
qualified loan does not mean you...
Verifying income and/or assets
Verifying employment
Accurately calculating the debt to income
ratio
Evaluating credit hist...
Lenders are able to charge higher interest rates
and/or fees for loans that pose a slightly higher risk
than a Qualified M...
The non-qualified loan is a great option for
borrowers in unique circumstances including:
Self-employed for less than 2 ye...
The non-QM loans are not meant to rip borrowers
off or provide them with a loan without the ability
to confirm its afforda...
Many lenders offer non-QM loans today, but they
are not all created equal. It pays to shop around
and see what each lender...
T O L E A R N M O R E
NONQUALIFIEDLOAN.COM
LENDER HOTLINE: 888-581-5008
C L IC K HE R E
NONQUALIFIEDLOAN.COM
LENDER HOTLIN...
Justin McHood is Americas Mortgage
Commentator and has been providing
Mortgage commentary for over 10 years.
INFORMATION P...
LEARN MORE ABOUT MORTGAGE COMMENTATOR:
MORTGAGECOMMENTATOR.COM
FACEBOOK.COM/MORTGAGECOMMENTATOR
@MORTGAGECOM_
LENDER HOTLI...
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Non Qualified Loan- NONQUALIFIEDLOAN.COM

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NONQUALIFIEDLOAN.COM
LENDER HOTLINE: 888-581-5008

Non-Qualified Mortgage Loan Guide for Residential Property Buyers and Owners
There are two types of mortgages: qualified and non-qualified. The difference is whether or not the government agencies protect the lender against any type of lawsuit against them should a borrower become unable to afford their mortgage payments and want to sue.

What is a Qualified Mortgage?

A “qualified” mortgage (QM) means that the borrower meets certain requirements pertaining to his ability to afford the loan at the time of application. In this case, the lender would be protected against any penalties regarding this loan should the borrower default.

What is a Non-Qualified Loan?

A “non-qualified” loan (non-QM), on the other hand, means that the borrower does not meet the “qualified mortgage” guidelines and poses a higher risk in terms of default. Basically, these borrowers are those that do not fit into the conforming model, yet still have the credentials to obtain a mortgage from lenders willing to provide them. These loans are available, yet the protection against being sued by the borrower is not provided.

Qualified Mortgage Rules

Understanding what makes a qualified mortgage will help you determine if you fall into the non-qualified loan category. The requirements are as follows:

Debt ratio cannot exceed 43% no matter the type of loan (FHA, VA, conventional)
Points and/or fees should not exceed 3% of the loan amount
The loan cannot be interest only, have negative amortization, or any other risky features
Verification of income is required (no stated income or asset verification only)
Loan term must not exceed 30 years
If you do not meet all of these requirements, you do not fall under the QM rules. This does not mean you are automatically unable to get a loan or that you are destined to have a high interest rate and/or fees – it means you will have to go to lender that offers a non-qualified loan.

Going Beyond Qualified Mortgage Guidelines

The Qualified Mortgage guidelines make it difficult for certain borrowers to obtain a loan. Whether you have a credit score on the lower end of the spectrum and the lender needs to charge higher fees in order to make up for the risk or you cannot verify your income because you are self-employed, but have plenty of assets to afford the loan or your debt ratio is higher than 43%, you may still qualify for a loan, but be outside the QM guidelines. These are QM loans that are being offered by some lenders. Immediately following the housing crisis, loans for borrowers in any of these predicaments was hard to find, but they are more readily available today by a variety of lenders.

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Non Qualified Loan- NONQUALIFIEDLOAN.COM

  1. 1. Non Qualified Loan NONQUALIFIEDLOAN.COM NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  2. 2. Non-Qualified Mortgage Loan Guide for Residential Property Buyers and Owners There are two types of mortgages: qualified and non-qualified. The difference is whether or not the government agencies protect the lender against any type of lawsuit against them should a borrower become unable to afford their mortgage payments and want to sue. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  3. 3. What is a Qualified Mortgage? A “qualified” mortgage (QM) means that the borrower meets certain requirements pertaining to his ability to afford the loan at the time of application. In this case, the lender would be protected against any penalties regarding this loan should the borrower default. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  4. 4. What is a Non-Qualified Loan? A “non-qualified” loan (non-QM), on the other hand, means that the borrower does not meet the “qualified mortgage” guidelines and poses a higher risk in terms of default. Basically, these borrowers are those that do not fit into the conforming model, yet still have the credentials to obtain a mortgage from lenders willing to provide them. These loans are available, yet the protection against being sued by the borrower is not provided. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  5. 5. Qualified Mortgage Rules Understanding what makes a qualified mortgage will help you determine if you fall into the non-qualified loan category. The requirements are as follows: Debt ratio cannot exceed 43% no matter the type of loan (FHA, VA, conventional) Points and/or fees should not exceed 3% of the loan amount The loan cannot be interest only, have negative amortization, or any other risky features Verification of income is required (no stated income or asset verification only) Loan term must not exceed 30 years NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  6. 6. If you do not meet all of these requirements, you do not fall under the QM rules. This does not mean you are automatically unable to get a loan or that you are destined to have a high interest rate and/or fees – it means you will have to go to lender that offers a non-qualified loan. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  7. 7. Going Beyond Qualified Mortgage Guidelines NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  8. 8. The Qualified Mortgage guidelines make it difficult for certain borrowers to obtain a loan. Whether you have a credit score on the lower end of the spectrum and the lender needs to charge higher fees in order to make up for the risk or you cannot verify your income because you are self-employed, but have plenty of assets to afford the loan or your debt ratio is higher than 43%, you may still qualify for a loan, but be outside the QM guidelines. These are QM loans that are being offered by some lenders. Immediately following the housing crisis, loans for borrowers in any of these predicaments was hard to find, but they are more readily available today by a variety of lenders. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  9. 9. Lenders basically look for compensating factors when accepting loans outside of the realm of the QM guidelines. For example, if you have a debt ratio that exceeds 43%, yet you have 24 months of reserves and a high credit score, you will likely qualify for a loan, but won’t fall under the QM protection. Certain lenders are willing to take that risk as you do not pose the same level of risk as someone that has a low credit score and very few reserves. This type of borrower would be a higher risk, require a higher interest rate and/or fees and be very likely to default on their loan. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  10. 10. Non-Qualified Does not Mean Not Able to Pay What needs to be stressed here is that a non- qualified loan does not mean you cannot repay the loan. The lender is still going to do due diligence in evaluating your financial situation. They will not provide loans to borrowers that do not demonstrate the ability to repay the loan. The Ability to Repay Rule, put into place by the Dodd-Frank Act, requires lenders to ensure that borrowers can afford the loan. This means: NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  11. 11. Verifying income and/or assets Verifying employment Accurately calculating the debt to income ratio Evaluating credit history NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  12. 12. Lenders are able to charge higher interest rates and/or fees for loans that pose a slightly higher risk than a Qualified Mortgage would allow, yet they must make sure the payment is affordable. What this means is the days of stated income and stated asset loans are gone. Lenders need solid proof that the borrower can afford the loan with slightly higher rates and/or fees with ease. They are not supposed to put borrowers in a difficult financial situation. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  13. 13. The non-qualified loan is a great option for borrowers in unique circumstances including: Self-employed for less than 2 years Self-employed and not showing a great amount of income on tax returns High debt ratio yet plenty of reserves to make up for the debt ratio Blemished credit due to unforeseen circumstances during the downfall of the economy NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  14. 14. The non-QM loans are not meant to rip borrowers off or provide them with a loan without the ability to confirm its affordability. They are meant to be an option for borrowers that do not fit the conforming or even FHA/VA mold as many borrowers do not fit it now. Non-QM did not necessarily take the place of subprime loans; it simply gives lenders options for borrowers that obviously qualify for a mortgage yet are not considered a good risk according to Fannie Mae or Freddie Mac. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  15. 15. Many lenders offer non-QM loans today, but they are not all created equal. It pays to shop around and see what each lender offers for your exact circumstances. If you have leverage, such as many months of reserves on hand, you have more bargaining power than a borrower with mediocre credit, a high debt ratio, and very few reserves. Use your compensating factors to your advantage in order to obtain the lowest rates and/or fees for your mortgage. NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  16. 16. T O L E A R N M O R E NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008 C L IC K HE R E NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  17. 17. Justin McHood is Americas Mortgage Commentator and has been providing Mortgage commentary for over 10 years. INFORMATION PROVIDED BY: Justin McHood Mortgage Commentator NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008
  18. 18. LEARN MORE ABOUT MORTGAGE COMMENTATOR: MORTGAGECOMMENTATOR.COM FACEBOOK.COM/MORTGAGECOMMENTATOR @MORTGAGECOM_ LENDER HOTLINE: 888-581-5008 NONQUALIFIEDLOAN.COM LENDER HOTLINE: 888-581-5008

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