Non-QM loans have led to the thriving of the house mortgage business. The loans are not certainly higher risk loans. And so, loanees do not follow standards such as more reserved cash and a higher score on credit. Qualified Mortgage (QM) provides lenders protection from liability brought by borrowers. Non-QM loans are given to consumers with low credit who have little assets for collateral.
How to get a loan with a low credit score
Types of non-QM loans include:
- Stated income-this is a loan given when one provides a documented proof of income.
- Not fully documented. You can still get a non-qm mortgage even when you have assets available, employment history and good credit. This happens when you don’t provide full documented income proof.
- Interest only. Were loans that were very popular in the past but today they are classified under no-QM loans.
- Higher debt to income ratio: Jumbo loans with 43% and higher DTI qualify as non-QM loans.
- A 40-year loan term. Any loan for more than 30 years is a non-Qm loan.
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Examples of the Non-QM loans that are coming back to the market
- The features of QM-loans change over the years thus after over ten years no Qm-loans can still have the same features.
- The reason the non-QM- loans were returning to the market rapidly was that Lenders wanted to get more buyers to give non-QM with the financing of up to 50 years.
- The Option, adjustable rate mortgage, is an example of a type of QM-loan that gives the borrower negative payback for a short period. This is not legal under the QM standards today.
- Also, stated income loans are becoming more popular as many people get their income from non-traditional sources. Seasonal workers are paid their dues in a few months, so they opt for stated income.
Other benefits of non-QM loans
- The non-QM loans are more accessible as the crisis of fiscal recedes. One can still qualify for a mortgage even if the debt-income mortgage is higher than average. There is worry that a significant number of non-qualified loans could cause another financial crisis.
- However, the concern is unjustified since non-QM-loans are not like old subprime loans.
- Non-QM-loans do not have the same characteristics as loans of 10-15 years ago. The mortgage rates and fees of non-qualified mortgage loans is slightly higher than those of QM loan lenders. This is because the security that QM loans offer is unavailable in the case of non-QM loans in addition to the fact that private investors can only access non-qualified QM loans.
When experiencing bankruptcy, one is forced to wait for some period to qualify for a mortgage via QM-loans. However, that is not the same with non-qualified mortgage loans. There is no minimum waiting period required for non-QM loans. And hence, low-income customers can enjoy access to them at any time.