Today, I’m here to discuss the concept of non-QM loans, a term that you may have come across in recent years. It’s important to understand the details and consider whether you could benefit from this type of loan. Non-QM loans are designed for individuals with irregular income patterns, typically self-employed individuals, commission earners, or business owners who prefer not to disclose high income.

These loans do not conform to the standards set by the U.S. government, Fannie Mae, or Freddie Mac. Therefore, they provide greater flexibility. Non-QM loans are typically backed by investment firms, large insurance companies, and other private entities. 

Also, employment verification is not always required for non-QM loans. Instead, lenders primarily assess the borrower’s income over the past year or two using bank statements, so clients should be prepared to provide them. The longer the income history, the better the potential interest rate.

“Non-QM loans do not conform to regular standards.”

Credit scores for non-QM loans generally need to be around 660 or higher, with higher scores leading to better rates. Also, the minimum down payment for non-QM loans is 10%, but borrowers can secure a slightly better rate by providing a 20% down payment. 

Non-QM loans operate under a completely different set of rules compared to traditional mortgages. They do not require private mortgage insurance (PMI), making them particularly attractive for purchasing unwarrantable condos and other properties.

However, non-QM loans are not available for rural properties such as farms or ranches. Plus, they typically do not rely on tax returns for income verification, as borrowers often have significant write-offs that would reduce their reported income. Lastly, it’s worth noting that the loan processing time for non-QM loans is similar to that of other loan types and that they can be utilized for purchasing both primary residences and investment properties. 

If you have any questions about non-QM loans, don’t hesitate to reach out. Remember, it’s always free to have a conversation, so feel free to call me anytime at (210) 215-4400. I look forward to hearing from you!