Non QM Loan: Non-Qualified Mortgages

Some borrowers do not meet the credit requirements or income documentation for a conventional Qualified Mortgage (QM) loan. For those borrowers we have a variety of Non-Qualified Mortgage (Non QM) loans.

A Non QM loan is different from a standard QM loan and is designed to provide flexibility in lending standards to accommodate borrowers who do not fit traditional lending criteria. Non QM home loans are for individuals who may have unique financial circumstances, allowing them to obtain mortgage financing through alternative means of income verification and credit evaluation. Unlike Qualified Mortgages which adhere to strict federal guidelines, Non QM loans are not bound by the same criteria set by the Consumer Financial Protection Bureau (CFPB). Lenders verify income using alternative methods for Non QM loans such as bank statements or profit and loss statements unlike the standard documentation required for Qualified Mortgages. This makes them an attractive option for those who may have credit issues like a recent bankruptcy or foreclosure or issues with documenting their income.

What are Non QM Loans?

Non QM loans are mortgage products that don’t conform to the standard underwriting guidelines set by the Consumer Financial Protection Bureau (CFPB) under the Qualified Mortgage rule. Qualified Mortgages follow specific guidelines for borrower qualifications, loan terms and fees to minimize risk to both lenders and borrowers. A qualified loan requires standard documentation like tax returns and pay stubs which is different from the flexible documentation allowed on Non QM loans. Non QM loans are more flexible and are for borrowers who don’t meet those strict requirements.

Eligibility for Non QM Loans

Non QM loans are designed for borrowers who don’t meet the traditional lending requirements of a qualified mortgage such as borrowers that: are self employed or having non traditional income sources, have a low credit score or limited credit history, have experienced a major credit event such as a bankruptcy or foreclosure, need a loan with a longer term or interest only payments or have a high debt-to-income ratio.

Key Features of Non QM Loans

• Alternative Income Documentation: Unlike traditional mortgages that require W-2s, pay stubs and tax returns, Non-QM loans may accept alternative forms of income verification. This can be bank statements, profit and loss statements or asset documentation.
• Higher DTI Ratios: Non QM loans often allow higher debt-to-income (DTI) ratios, accommodating borrowers with substantial debt or unconventional income streams.
• Flexible Credit Requirements: There are Non QM loans available to borrowers with lower credit scores even as low as a 500 credit score.
• No Waiting Periods: No mandatory waiting periods after credit events like bankruptcy or foreclosure.
• Non Owner Occupied Properties: Non QM loans can be used to finance investment properties or second homes and not just primary residences.
• Interest Only Payments: Non QM loans may include interest only payments which can prevent borrowers from reducing their loan balance over time.
• Longer Loan Terms: Non QM loans can have longer loan terms which can impact the borrower’s financial planning and equity building. Some Non QM loans may also have balloon payments which require a large sum to be paid at the end of the loan term and can be a financial risk if not planned for properly.

Types of Non QM Loans

Alpine Mortgage is a Non QM mortgage company with a variety of Non QM loan programs to fit our borrower's needs. Here are the types of Non QM Loans we offer:

Alternative Documentation Options for Self Employed Borrowers

Our Non QM loan programs offer different income verification options such as:

• Bank Statement Loans: For self employed borrowers that can verify their income with deposits on their bank statements.
• Profit & Loss Loans: Another program for self employed borrowers where qualification is based on a profit & loss statement for the business. No bank statements or tax returns are required.
• 1099 Income Loans: For independent contractors that can qualify with their 1099 form.
• Asset Depletion Loans: Allows borrowers to use their substantial assets to qualify for a mortgage instead of employment income.
• Debt Service Coverage Ratio Loans (DSCR Loans): For real estate investors that can qualify for a loan based on the cash flow of a rental property.

Borrowers with Credit Issues

Our Non QM loan programs are also for borrowers with different credit issues such as:

• Low Credit Scores: Minimum credit score as low as 500.
• Bankruptcy: No waiting period after a Chapter 7 or Chapter 13 bankruptcy.
• Previous Foreclosure: No waiting period after a foreclosure.

Choosing the Right Non QM Lender

When looking for Non QM loan options it’s important to work with a lender that is reputable and experienced in this area. At Alpine Mortgage we specialize in Non QM lending and are committed to helping borrowers find the right loan for their situation. Lenders play a big role in offering Non QM loan products to fit the different financial needs of borrowers.

Here are some factors to consider when choosing a Non QM lender:

• Experience: Look for a lender with a history of Non QM lending. Experienced lenders will know the different loan programs and can walk you through the process with ease.
• Product Offerings: Choose a lender that has multiple Non QM loan products so you have options for your situation. At Alpine Mortgage we have a full range of Non QM loan programs for our borrowers.
• Reputation: Research the lender's reputation in the industry and read reviews from past borrowers. A reputable lender will have a history of satisfied customers and positive feedback.
• Customer Service: Work with a lender that prioritizes customer service and communication. A responsive and supportive lending team can make the process smoother and less stressful.
• Competitive Rates and Fees: While Non QM loans may have slightly higher rates compared to traditional mortgages, it's still important to shop around and compare offers from multiple lenders. Look for a lender that offers competitive rates and transparent fees.

The Non QM Loan Process

Applying for a Non QM loan is similar to the process for a traditional mortgage, with a few key differences. Here's what you can expect:

• Pre-qualification: Before beginning the formal application process, you can complete a pre-qualification from a Non QM lender. This involves providing basic information about your income, assets, and credit to determine your eligibility and potential loan terms.
• Application: Once you've found a property and are ready to move forward, you'll submit a formal loan application. This will include detailed information about your finances and the property you wish to purchase.
• Documentation: Your lender will request various financial documents to verify your creditworthiness. For Non QM loans, this may include alternative documentation such as bank statements, profit and loss statements or leases for investment properties.
• Underwriting: The lender's underwriting team will review your application and supporting documents to determine your eligibility for the loan.
• Appraisal: An independent appraisal of the property will be conducted to ensure its value supports the loan amount.
• Loan Approval & Closing: If your application meets the lender's criteria, you'll receive a loan approval, which may include specific conditions that need to be met before closing. Once all conditions are satisfied, you'll attend a closing meeting to sign the final loan documents and complete the transaction.

Who is a Non QM Loan for?

Non QM loans are ideal for a variety of borrowers who find that traditional mortgage products do not meet their needs. This includes:

• Self-Employed Individuals: Those who run their own businesses or work freelance may have difficulty presenting traditional proof of income documents. Non QMs allow them to use alternative methods to verify their income.
• Real Estate Investors: Investors often turn to Non QM loans due to their ability to finance properties that might not qualify under standard lending guidelines. This can include fix-and-flip projects or rental properties.
• Borrowers with a Non-Traditional Credit History: Individuals who do not have a standard credit history or who have had past credit issues may find more flexible borrowing options with Non QM loans.
• High Net Worth Individuals: Those with significant assets but irregular income streams can benefit from asset-based lending options available within Non QM loans.

Benefits of Non QM Loans

Non QM loans offer several advantages for borrowers who might not fit the mold of traditional mortgage applicants. Here are some key benefits:

• Flexibility in Income Verification: Non QM loans have alternative ways to verify income such as bank statements or asset documentation. This is great for self employed business owners and those with non-traditional income.
• Tailored Loan Products: Non QM loans are customizable to meet the needs of different borrowers. Whether it's an investment DSCR loan, a bank statement loan or a loan for foreign nationals, Non-QM products can be tailored to fit unique financial situations.
• Access to High-Value Properties: Jumbo Non QM loans allow borrowers to finance high value properties that exceed conforming loan limits. This access to larger loan amounts makes it possible for buyers to purchase luxury homes or investment properties.

Potential Drawbacks of Non QM Loans

While Non-QM loans offer significant benefits, there are also some potential drawbacks to consider:

• Higher Interest Rates: Non QM loans typically come with higher interest rates compared to Qualified Mortgages. The increased risk to lenders due to the flexible qualification criteria often results in higher borrowing costs for borrowers.
• Larger Down Payments: Non QM loans may require larger down payments, sometimes 20% or more, to offset the increased risk to lenders. This requirement can be a barrier for some borrowers who may not have a lot of savings.

Non-Qualified Mortgages offer flexible, accessible loan options for those who might not fit the mold of traditional borrowing. Whether dealing with credit challenges, irregular income or unique investment needs, Non QM loans provide a pathway to homeownership where traditional mortgages might not. For anyone considering a Non QM loan, it's important to consult with a Non QM mortgage lender or a mortgage broker to understand fully the benefits and potential risks associated with these loan types. Alpine Mortgage offers Non QM loans in the following states: California, Connecticut, Florida, Georgia, New Jersey, New York, Pennsylvania and Texas.

If you are interested in learning more about our Non QM loan programs, call us today at (800) 876-5626 to speak with one of our Non QM loan specialists or click here to have one of our Non QM loan specialists contact you.

If you are interested in applying for a Non QM loan, you can apply online now. 

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Non QM Loan Resources

• Bad Credit Mortgage Loans
• Bankruptcy Loans
• Investment Property Loans
• DSCR Loans
• No Doc & Low Doc Loans