Nonconventional Loans
Nonconventional Loans are also referred to as Non-QM loans. To understand what a Non-QM loan is, you need to understand what a QM loan is. Qualified Mortgages or QMs are loans that follow the regulations issued by the CFPB to ensure that lenders are providing safe and sustainable home loans for consumers. Qualified Mortgages must follow the ability to repay guidelines which means lenders must make a good faith effort to determine that borrowers can repay the loan. QM’s loans must also not have risks like negative amortization, interest-only payments, balloon payments, and excessive terms or fees. They must also satisfy one of the following:
- Borrower’s debt-to-income (DTI) ratio is 43 percent or less
- Loan is eligible for purchase, guarantee, or insurance through the Federal Housing Administration, Veterans Affairs, United States Department of Agriculture, or a government-sponsored enterprise (GSE), regardless of the DTI ratio
- Loan was originated by insured depositories with total assets less than $10 billion and must be held in a portfolio for at least three years
On the other hand, any loan that doesn’t satisfy the above-listed rules is called a Non-QM loan. A Non-QM loan is not necessarily a riskier loan; it is one that simply doesn’t satisfy the QM standards. Examples of some of the more popular Non-QM loans include limited or alternative documentation loans. These loans work well for borrowers considered “gig workers” and others who do not fit the cookie-cutter borrower mold. Additional Borrowers who may benefit from these loans are:
- Self-employed borrowers
- First-time homebuyers
- Borrowers with substantial assets but limited income
- Jumbo loan borrowers
- Investors
- Foreign nationals
Contact one of our experienced Loan Officers in Easton, MA to find out the best loan options for your circumstances.
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