What Are Non-QM Loans Versus QM Mortgages?

Posted by Kim Jones-Zweig on Thursday, May 31st, 2018 at 3:17pm.

What Are Non-QM Loans?

Non Qualified Mortgages are a great way for borrowers with credit glitches to take advantage of the robust real estate market.  These mortgages are originated without the guidelines associated with Fannie Mae or Freddie Mac; which means they do not have to meet their guidelines.  This is a very popular option for homeowners and investors.  These mortgages are sold to individual investment companies.

  • What Are Non-QM Loans:

    • Non Qualified Mortgages are mortgage loans that do not fall into the Qualified Mortgage Category

  • Non Qualified Mortgages are not riskier loans

  • But these loans are often called “outside of the box” loans

  • Non-QM Loans do not fit the Qualified Mortgage lending guidelines and the complexity of the Qualified Mortgage guidelines

  • Mortgage rates and fees are slightly higher for Non-QM loans

  • This is due to the limited liquidity the lender has  to sell their loans on the secondary market

  • Non-QM Loans cannot be sold to Fannie Mae and Freddie Mac

  • Are normally sold to other secondary markets to private investors or held by the lender under their own portfolio 

Non-QM Loan Borrowers;

Qualified Mortgage requires a mandatory waiting period after bankruptcy and foreclosure in order for a home buyer to qualify for a mortgage.

  • Borrowers who do not meet the minimum mandatory waiting period after bankruptcy, deed in lieu of foreclosure, foreclosure, and short sale who cannot qualify with a QM Loan can now qualify with Non-QM Loans

  • There is no waiting period after a foreclosure or short sale to qualify for Non-QM Loans with The Gustan Cho Team at Gustan Cho Associates

  • With real estate values skyrocketing in many parts of the country, home buyers can become homeowners with Non-QM Loans and can refinance later after they can qualify for QM Loans

If borrowers do not meet these guidelines for QM - FHA Loan and Conventional Loans, they now can qualify for Non-QM Loans:

  • FHA and VA Home Loans require 2 year waiting period after Chapter 7 Bankruptcy discharge

  • Fannie Mae and Freddie Mac require a 4-year waiting period after a Chapter 7 Bankruptcy discharged date for Conventional Loans

  • FHA requires a 3 year waiting period after the recorded date of a deed in lieu of foreclosure and foreclosure and also three years after the date of the finalized short sale date to qualify for an FHA Loan

  • VA has a two year waiting period after foreclosure, deed in lieu of foreclosure, short sale to qualify for VA Home Loans

  • Fannie Mae and Freddie Mac require a four year mandatory waiting period from the recorded date of a deed in lieu of foreclosure and/or date of a short sale to qualify for a Conventional Loan

  • Fannie Mae and Freddie Mac will require a seven-year waiting period from the recorded date of a foreclosure in order for a borrower to qualify for a Conventional Loan 

There are many home buyers who have recovered after their bankruptcies and foreclosures. However, they cannot qualify for a mortgage due to not meeting their waiting period.

  • With Non-QM Loans, these folks can now qualify for a mortgage with Non-QM Loans with no waiting period after a housing event

  • 20% down payment is required with 640 credit scores

  • Borrowers with 680 credit scores can qualify with 10% down payment

  • 660 credit scores require 15% down payment

  • 43% debt to income ratios but up to 50% DTI with compensating factors

  • Home buyers who do not meet the above guidelines after a bankruptcy and foreclosure can now qualify for Non-QM Loans

Again, real estate values are increasing in many areas of the country where home buyers now do not have to miss an opportunity to purchase a home due to not meeting their mandatory waiting period after a bankruptcy and foreclosure.

Senior Mortgage Banker
Top Producer and
MBAG Platinum Award Member
Fidelity Bank Mortgage
304 Tribble Gap Road, Suite 200
Cumming, Georgia 30040
p: 678.468.4046 | f: 678.829.0612
e: kim.jones@lionbank.com
w: www.kimdjones.com

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