In the process of purchasing a home, there are lots of questions and concerns one may have throughout the process, but one thing that many people don’t think about is what happens after you are not qualified through the conventional loan process?
There are plenty of reasons people don’t get qualified for a home loan; whether it be due to their current financial situation or credit history, it can be a difficult situation to understand and come to terms with, especially if you have been working at getting a home loan for a long time.
This is when a non-qualifying mortgage can come into play and help you in the process when you weren’t able to be qualified with conventional methods. Due to recent rules and regulations, lenders have become a little more stringent when it comes to qualifying consumers for a home loan, and even if a consumer may look good on paper, some lenders still may not qualify for a home loan due to these standards. If you have found yourself in a position where you want to purchase a home but are having a difficult time getting qualified, a non-qualifying mortgage might be the best option for you.
What Is a Non-Qualifying Mortgage?
A non-QM loan is any loan product that doesn’t meet the standards of a qualified mortgage.
Most people are aware of the housing crisis that affected many homeowners who were victims of predatory lending, but out of that situation the QM rule was created which required lenders to offer loans with feature that protected people from getting loans for homes they could not afford.
How Do I Qualify?
The key components of the QM rule are as follows:
-Ability to repay: the lender must document your income and financial situation before approving you for a loan. The underwriting process must verify the following: income, employment status, monthly payment on covered transaction, monthly on any loan secured by the home, monthly for mortgage related obligations, current debt, debt to income ratio, and credit history.
-Loans cannot extend 30 years or have interest only payments
-Restrictions on fees that can increase borrowing costs
-There is a limit on how much of your earnings can be put toward your mortgage payments and other outstanding bills. This usually involves calculating your debt to income ratio.
Is It Right For Me?
There are several reasons why you may not be qualified for a conventional loan through a traditional lender but that does not mean you are out of options. If you happen to be self-employed, a non-QM loan might be a good option for you. If you don’t get paid on a traditional pay period, some lenders may think you cannot afford a mortgage but a non-QM lender has flexibility with their terms so it’s possible to still get qualified in these cases.
Another potential borrower for a non-QM loan might be someone who plans to invest in real estate in order to turn a profit. These are often called fix and flips and works for the both the lender and consumer because they both want to keep the term of the loan as short as possible so they can both receive a profit as quickly as possible.
One market that a lot of lenders may not consider is that of foreign nationals. There are people who want to purchase property in the United States but cannot qualify due to their residency status. Non-QM loans are a great option for those in this situation and can use credit reports from their country to get approved.
Contact Us Today!
Although the situations above are reasons to consider a non-QM loan, there are some consumers who just find it difficult to qualify because housing prices are going up and the living wage simply does not meet the requirements for a traditional mortgage. Whatever the reason you are considering a non-QM mortgage, we can assist you in the process. Please reach out to JZ Mortgage Services in Bradenton, FL today!