One of the significant accomplishments in a person’s life is to own a home. If you are not financially well-off, you can use a mortgage to purchase a home. There are various types of mortgages, and in this context, we will discuss about non-QM loans.
For starters, non-QM loans do not follow the rules and regulations that are set by the government in 2009. Non-QM loans have not been present for quite some time, but they are now making their way back into the market.
What you should know about non-QM loans
About Non-QM Loans
The Customer Finance Protection Bureau (CFPB) came up with a new set of regulations in 2014. These regulations were meant to offer some guidance on what qualified mortgages entail. These laws were also intended to protect mortgage lenders after the issuance of loans that met the threshold that was outlined by the federal government.
After these laws were passed, the non-QM loans did not meet the standards of the Customer Finance Protection Bureau (CFPB). For a person to access a non-QM loan, they must have a high credit score and substantial cash reserves.
Some of the conventional non-QM loans that are present today are such as:
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1. Interest only
These loans were present some years back, but they cannot be classified as non-QM loans at the moment.
2. Stated Income
This is a non-QM loan that cannot be fully documented as a loan. If an individual does not provide full documentation about their proof of income, that cannot be classified as a non-QM loan.
3. 40-year Loan Term
A loan that exceeds a term of 30 years is a non-QM loan.
4. Higher Debt to Income Ratios
If you have access to a jumbo loan that has a DTI higher than 43% that is termed as a QM loan.
Additional Information about Non-QM Loans
To gain an in-depth understanding of non-QM loans, you must first understand that QM loans are defined by the Customer Finance Protection Bureau (CFPB). A non-QM loan possesses the following characteristics:
- It does not have an excessive fee.
- A non-QM loan is not interests only.
- Non-QM loans do not have DTI limits, and as compared to QM loans, their rates can be higher than 43% especially when a client has a huge cash reserve.
The non-QM loans that are on offer by non-QM mortgage lenders are many, and they are mostly offered to people who borrow substantial amounts of money. Although the non-QM loans do not follow all the regulations set by the Customer Finance Protection Bureau (CFPB), people can still access such loans.
One of the requirements are such as showcasing your employment status as well as your sources of income to ensure that you can afford the loan. After presenting the necessary requirements, the non-QM mortgage lenders will ensure that your dream to become a homeowner becomes a reality.