Non-QM loans
Not all borrowers are alike, which is why Non-QM products were developed. Many credit-worthy borrowers don’t fit into the conforming loan guidelines. In response, lenders like Mortgage Equity Partners offer a wide selection of Non-QM solutions. Our goal is to provide the best mortgage experience for our borrowers, including having the industry’s most diverse and inclusive portfolio of loan programs.
A Non-QM or non-qualified mortgage is a home loan that doesn’t meet the U.S. Department of Housing and Urban Development’s (HUD) Q.M. definition. To meet HUD’s Q.M. definition, a mortgage loan must meet the following guidelines:
- Require periodic payments without risky features
- Have terms not to exceed 30 years
- Limit upfront points and fees to no more than three percent with adjustments to facilitate smaller loans
- Be insured or guaranteed by FHA or HUD
Here is a list of our Non-QM loan solutions
Investment
DSCR – Debt Service Coverage Ratio Loans, also known as Investor Cash Flow Loans. If you want to purchase an investment property but don’t want to use your personal income to qualify, you may want to use a DSCR loan. Your debt service coverage ratio will be examined to determine your eligibility. A DSCR loan is a measure of the cash flow a borrower has to pay against a current debt obligation for an investment property. A DSR is a Non-QM loan used by real estate investors to help them qualify for a loan based on their property’s cash flow. To qualify, the property must generate enough rental income to offset the mortgage payment plus other expenses associated with the investment property. The debt service coverage ratio is calculated by dividing the net operating income of the investment property by the debt obligations. A DSCR loan doesn’t require proof of personal income through tax returns or pay stubs. However, a real estate investor must show their ability to repay the loan with a qualifying DSCR.
Highlights:
- Max 80% Purchase
- Max 80% Rate and Term Refinance
- Max 75% cash-out Refinance
- Loan amounts down to $100K and up to $3 million
- Minimum FICO 575
Fix & Flip – Fix and Flip loans are for housing market investors profiting from the ability to purchase older derelict properties, fix them up, and either resell or rent out these properties for passive income. Borrowers with any level of investor experience can apply for these loans. They are suitable for non-owner-occupied single-family, multi-family up to four-unit property types. Purchase loans will go up to 85% of the cost of the property, and construction loan amounts will go up to 100% of the cost. In addition, Fix and Flip loans offer a 12-month term with interest-only payments, so the investor will have a low monthly payment as they fix up the property.
Highlights:
- Purchase and Construction
- Refinance and Construction
- Minimum FICO 660
Financing up to 24 Units loans are designed specifically to purchase small multi-family housing developments. To qualify for a small balance multi-family loan, you need a minimum DSCR of 1.0. The debt service coverage ratio is calculated by dividing the net operating income of the investment property by the debt obligations. This type of financing allows for purchase, rate and term refinance, and cash-out refinance loans. These loans are typically used by more seasoned investors who tend to want to use the property for a passive income stream. Multi-family mortgages work much the same as single-family mortgages, with 30 years being the standard loan term.
Highlights:
- Max 70% LTV on purchase and rate-term refi
- Max 65% LTV on Cash-out refi
- Down to 625 Mid FICO
- Loan amounts down to 250K and up to $3 million
- Interest-only options are available
- Minimum of 6 months P & I in reserve
Foreign National – A Foreign National loan program is a lending option for non-residents in the United States looking to purchase a home, whether for an investment or to use as a home when visiting. Foreign Nationals face unique challenges when attempting to buy property. Our Foreign National loan program allows non-residents to get a mortgage without a social security number, green card, or visa. Additionally, they are not required to have a FICO score to provide proof of credit. Instead, Foreign National borrowers can demonstrate creditworthiness through other means or submit a credit report from their country of origin. Foreign National loans are also known as ITIN loans or non-permanent resident alien loans. These programs allow non-citizens to purchase property without the traditional documentation required.
Highlights:
- Documentation requirements
- Ability to finance second homes and investment properties
- Loan Amounts down to $100K and up to $3 million
- Reserves not required
- Non-Owner occupied only
- ARMs and 30-year Fixed Rate loans are available
Self-Employed
Bank Statement – A bank statement loan, also known as a Stated Income Loan, is typically used by a self-employed borrower looking to purchase a home. With this type of loan, you qualify for a mortgage based on your bank statements instead of tax returns or W2s. This loan is beneficial for borrowers with inconsistent incomes month over month. Bank Statement loans are a Non-QM product and are considered riskier than traditional loans. Bank Statement loans offer some flexibility for self-employed borrowers, but they can have more strict qualifying guidelines.
Highlights:
- Max 90% LTV on purchase
- Max 80% on Refinance
- Loan Amounts down to $100K and up to $4 million
- Reserves are not required at less than or equal to 75% LTV
1099 as Income loan is an option for self-employed borrowers who are 1099 workers. Many freelancers, contractors, gig economy workers, or other self-employed borrowers who file using W-9s have difficulty qualifying for a traditional mortgage. A 1099 loan helps many self-employed 1099 earners achieve homeownership.
Highlights:
- Max 80% Purchase
- Max 80% Refinance
- Min FICO 600
- Loan amounts down to $100K and up to $4 million
- Reserves are not required at less than or equal to 75% LTV
P&L Only Income loan programs allow self-employed borrowers to qualify for a mortgage base on a P&L prepared by a CPA on the CPA’s letterhead. This documentation must cover the most recent two years and the Year-to-Date for the business. P&L loans can be used for owner-occupied, non-owner-occupied, and second homes. Property types include single-family residences, townhomes, and condos. P&L Only Income loans are another way to provide flexibility in lending to non-traditional borrowers.
Highlights:
- Max 80% Purchase
- Max 80% Refinance
- Min FICO 600
- Loan amounts down to $100K and up to $4 million
- Reserves are not required at less than or equal to 75% LTV
Retirees
Reverse Mortgage, also known as a Home Equity Conversion Mortgage (HECM), allows homeowners to borrow money using their home as security for the loan. With a reverse mortgage, borrowers do not make monthly payments. Instead, the loan is repaid when the borrower no longer lives in the home. Interest and fees are added to the loan balance monthly. With a reverse mortgage, homeowners must still pay property taxes and insurance and use the property as their primary residence while keeping the home in good condition. To be eligible for this type of loan, you must be 62 or older.
Highlights:
- Must be 62 or older
- Property must be your principal residence
- Must own home outright or have a low mortgage balance
- HUD counseling required
- Must have funds for property taxes, insurance, and maintenance
Asset Depletion is a non-QM loan that allows borrowers to use their assets to qualify for a mortgage instead of employment income. Assets are used as collateral for paying back the loan. Money market accounts, checking or savings accounts, certificates of deposit, retirement accounts, or investment accounts. Borrowers who can benefit from Asset Depletion Mortgages include those who are self-employed with insufficient traditional, verifiable income, retirees with insufficient verifiable fixed income, or individuals with many assets in the U.S.
Highlights:
- Must use liquid assets as collateral
- Minimum age 57.5 to use retirement accounts
- No minimum age for non-business liquid assets
- ARMs and 30-Year Fixed Rate
Other Non QM Loans
Non-Warrantable Condo & Coop is any condo that doesn’t meet all of Fannie Mae’s or Freddie Mac’s qualified lending guidelines. For example, a condo is not warrantable if it includes manufactured homes, requires membership, operates as a hotel or motel ask known as a condotel, is part of a continuing care facility, is a party to a lawsuit, allows a single person or business to own more than two units (for developments with 20 units of less) or 20% of all the units (for developments with 21 units or more), feature non-residential or commercial space exceeding 35% of the project or have more than 15% of the units in the project 60 days or more delinquent on their HOA dues. It isn’t easy to secure traditional financing when a condo is non-warrantable. Our non-warrantable condo loan allows borrowers to finance these homes with an affordable, flexible loan program.
Highlights:
- New construction buildings permitted
- LTV as high as 80%
- Purchase, Rate & Term Refinance, and Cash-Out Refinance
- Loan amounts at high as $3 million
VOE as Income is a loan that doesn’t require W-2s, pay stubs, or tax returns. A VOE or Verification of Employment is a mortgage program where the employer handles all the verification directly. If you are a salaried worker or wage earner, this program could work for you as an alternative type of financing.
Highlights;
- Max 80% LTV
- Min FICO 600
- Minimum 24-month rent or mortgage history
- The borrower cannot be employed by a family member
To learn more about our Non-QM line of products, contact one of our experienced loan officers near you today.
Source: hud.gov
