By Lisa McNeil, Tidewater Home Funding
When seeking a mortgage, lenders normally review standard requirements for qualification, such as income, credit and job stability. But where does that leave creditworthy borrowers who are financially ready to buy a house and are unable to qualify due to not having a traditional income, W2 or pay stub? For those who do not fit inside the traditional lending box, non-QM loan programs may provide a solution, keeping your path to home ownership still within reach.
What is a non-QM loan?
A non-QM loan, or non-qualified mortgage, is an alternative financing solution for those who do not meet the traditional lending standards set by the Consumer Financial Protection Bureau (CFPB). Consumers may seek out a non-QM loan if looking to qualify for financing without relying on their personal income or employment, if they have a unique income stream or if they have considerable assets but lack an established credit history or credit score. Continue reading to learn non-QM loan solutions for common, real-life scenarios:
Self-employed: Generally used by small business owners or independent contractors, the Bank Statement Loan Program focuses on income verification based on business or personal bank statements versus W2s or pay stubs, plus you do not need to own 100 percent of the business to qualify.
Real estate investors: For those interested in buying a short-term or long-term rental property without relying on personal income or employment information to qualify, a Debt Service Coverage Ratio (DSCR) loan may be an option. Instead of a traditional evaluation, lenders analyze the DSCR of a property to determine financing.
Substantial assets: There are times when buyers may have the cash on-hand to purchase a property but opt to finance the investment in a home or rental property to maintain liquidity. Enter the Asset Qualifier Mortgage loan program. Instead of evaluating your personal income, employment or debt-to-income (DTI) ratio for your ability-to-repay, this program evaluates your liquid assets for qualification.
An Asset Qualifier Mortgage can also offer a solution for self-employed individuals, retirees or divorcees with no income, and to “Credit Invisibles”; that is, those who may not have an established credit history or credit score.
While a home buyer has the option for a non-QM loan, it’s important to note it is not the same as a traditional or non-conforming loan. Non-QM loans do not conform to CFPB standards and often feature flexible credit and income requirements. A non-conforming loan, also known as a jumbo loan, is set by the standards of the Federal Housing Finance Agency (FHFA). The most distinguishable feature of a non-conforming loan is the loan limit. A non-conforming loan exceeds the maximum conforming loan limit of $766,550. Alternatively, a non-conforming loan can also be a loan that does not meet agency guidelines.
Non-QM loan programs offer a financing solution for those unable to meet the requirements of traditional mortgage financing due to variable income or non-traditional employment. If interested in learning more about non-QM loan programs and eligibility requirements, call a professional and experienced loan officer to serve as a resource, enabling you to make an informed decision.
Lisa McNeil, NMLS ID #267484, is a licensed loan officer with Tidewater Home Funding, LLC. in Newport News. She may be contacted at lmcneil@tidewaterhomefunding.com or 757-759-9035. Tidewater Home Funding is licensed in VA, NC and FL. NMLS ID #41552 (www.nmlsconsumeraccess.org). Equal Housing Lender.
