Non-QM Loans: What is a Non-Qualified Mortgage?
A non-qualified mortgage, or non-QM, is a loan option available to help potential homebuyers who may not meet the requirements of a traditional home loan.
Non-QM loans could help potential borrowers who may be self-employed, missing documents or have potential issues with their credit qualify for a home loan.
If you think a non-QM loan could help you achieve your dream of becoming a homeowner, start your application today.
What is a non-QM loan?
Non-QM loans are mortgages designed to help borrowers who don’t meet a lender’s traditional requirements.
While traditional mortgages require W-2 forms, tax returns and strict debt-to-income (DTI) ratio maximums, non-QM loans will look at additional documents to determine a borrower’s ability to repay their loan. This makes non-QM loans accessible for self-employed or freelance workers who seek home loans.
How do non-qualified mortgages work?
Non-qualified mortgages do not follow the strict rules that qualified mortgages have to. These rules are set by the Consumer Financial Protection Bureau (CFPB) to help ensure borrowers are able to pay back their loans. Since non-QM loans do not follow these rules, you may see a higher interest rate on your mortgage as they are considered riskier.
What’s the difference between a non-QM loan and a DSCR loan?
DSCR loans differ from non-QM loans as they are used for investment properties.
Debt service coverage ratio, or DSCR, loans allow buyers to use the property’s potential income to be factored in to purchase the property. A DSCR loan does not require W-2s, tax returns or income to help qualify.
Who qualifies for a non-QM loan?
Non-QM loans are available to help borrowers who do not meet the strict requirements set for a traditional mortgage. Anyone looking to buy a home with fluctuating income or credit issues could qualify for a non-QM loan.
Buyers who benefit may include those with non-traditional income sources
Here are examples of some homebuyers who could benefit from non-QM loans.
- Self-employed individuals
- Contractors
- Property investors
General criteria used to qualify for a non-QM loan
If you are looking to qualify for a non-QM loans, here are some criteria lenders set that you will have to meet.
- Minimum credit score: 620
- Down payment options: 10% to 25%
- Proof of income: Bank statements, profit and loss statements, rental income or 1099 income
- Savings: Three to 12 months of savings to cover any mortgage payments
Exact requirements for a non-QM loan can vary slightly depending on your lender.
Where can I apply for a non-QM loan?
You can apply for a non-QM loan online with a trusted lender, like Rate. Online non-QM applications with Rate will connect you with a professional Loan Officer. Your Loan Officer can help you through the application process and answer any questions about qualifying for a non-QM loan.
Ready to start your application? Apply for a non-QM loan today!
Applicant subject to credit and underwriting approval. Restrictions apply.
Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Rate does not guarantee or assume liability for the accuracy, completeness or timelines of the information. You should conduct additional research before making any mortgage related decisions.
