If you’re self-employed and want to buy a house, you will find that it’s difficult to get a loan. The underwriting guidelines for home loans don’t cater to the needs and abilities of the freelancer, business owner, or contractor.
Non-Qualified Mortgages (Non QM loans) are your easiest solution to this problem. While the guidelines of Qualified Mortgages don’t allow for the self-employed to purchase a home or refinancing the house they already live in, Non QM loans will help you purchase your dream-home with less complications and stress.
Non-Qualified Mortgages allow self-employed people to purchase a home using different guidelines and underwriting rules. These loans are still based on the borrower’s Ability to Repay (ATR), which means credit history and income will be verified and taken into account. This will ensure the lender that the self-employed person will be able to reply the loan.
Here is how the self-employed can benefit from Non QM Loans:
Easy Income Verification
The self-employed have different financial situations than other borrowers which means complicated tax returns and paperwork, but a non-QM loan will help people obtain a house against traditional underwriting guidelines.
Self-employed people may have sporadic income. Some months they may receive a high income, while others are low. Because of this, obtaining a Qualified Mortgage is difficult since it shows the lender that your income is not always reliable.
A Non QM home loan allows borrowers to verify income through bank statements without the need for pay-stubs and tax forms so that you can easily prove your ATR the loan.
Non QM loans offer a longer term of payment for people who have sporadic income that differs from month to month. The payment plan can be spread out for up to 40 years, allowing for inexpensive monthly costs.
If you choose the 40-year plan, you know that your payment costs are practical so that if something devastating should happen to your business, you won’t lose the roof over your head. This is also great for self-employed people who do seasonal work and earn most of their income during a set amount of time because it will allow you to save money from that period so that you can pay your loan back a little bit each month and at a rate that won’t leave you scrambling for help.
No Private Mortgage Insurance
With Non QM loans, there is no Private Mortgage Insurance (PMI). A PMI policy would normally keep you covered if you defaulted on a loan, but you’d be paying a large sum on top of your usual mortgage payments, which can be disastrous if you’re entering one of your slow months.
By eliminating PMI and the need for this insurance, these loans allow you to keep the income you earn, helping you save money that will help pay back your Non QM loan so that you don’t default in the first place.
Are you self-employed and think you may benefit from a Non QM loan? Comment below!