Non-Qualified Mortgages: How They Work and Who Can Benefit

Non-Qualified Mortgages (Non-QM) are a type of home loan that do not meet the strict criteria set forth by government agencies like Fannie Mae and Freddie Mac. While they may carry higher interest rates and require larger down payments, Non-QM loans can offer greater flexibility for borrowers who may not qualify for traditional mortgages.

How you can qualify for a mortgage, even if you can’t verify your income.

If you’ve tried to qualify for a mortgage before, you know the requirements can be pretty strict. The debt-to-income ratio standards are tough enough, but if you can’t verify your income, you’re pretty much out of luck with a traditional mortgage. These regulations were put in place to protect the housing market after the Great Recession, but unfortunately, self-employed people got caught in the crossfire. If you’re self-employed or can’t verify your income, what can you do?

Fortunately, this is where non-qualified mortgages come in. These loans don’t have strict income requirements, so if you have trouble verifying your income but have the cash flow to make regular mortgage payments, you can still purchase a home. This makes these loans a fantastic option for retirees, self-employed people, investors, business owners, foreign nationals, and more.

“You don’t need perfect credit to purchase a home.”

There are plenty of perks to non-qualified mortgages. First, the credit score requirements aren’t as strict, so you don’t need perfect credit to own a home. As previously mentioned, income verification isn’t as stringent, either. You can use alternative documentation instead of a W-2, so business owners and people who live off their investments can still qualify. Plus, non-qualified mortgages are subject to the same lender requirements as other loans, so they don’t typically come with additional risks.

Non-qualified loans come with a lot of pros, but there are a few cons as well. Interest rates and fees are typically higher for non-qualified loans. Also, lenders typically require you to put down 20% on these types of loans, so you may have to pay more upfront. On top of that, you might need to seek out a specific lender who specializes in this type of loan product.

While non-qualified mortgages aren’t for everyone, they provide an invaluable option for people who otherwise might not be able to qualify for a mortgage. If you’d like to learn how you can qualify for this type of loan or have any questions, please call or email me. I am always willing to help.