Non-Qualified Mortgage loans play a role in helping make the dream of owning a home potential to many people. These loans don't meet the rigorous financial standards of the Qualified loan. They have less restrictive conditions that allow Non-QM lenders to accept alternative income documentation to qualify borrowers for their mortgages or arrange loans with no income verification whatsoever.
Non-QM is the alternative to QM loans. The QM Qualified Mortgage brought to life by the Consumer Financial Protection Bureau (CFPB) created minimum standards for mortgages, including the Ability to Repay (ATR) principles and a Qualified Mortgage in effect on January 10, 2014. Loans insured or sold by lenders to Freddie Mac and Fannie Mae are qualified mortgages. Unfortunately, these QM loans are not accessible to everyone due to the rigorous nature of the prerequisites in the loan application and review process, opening the door for Non-Qm Loan programs.
Lendersa® non-Qm lenders offer loans to self-employed borrowers with complex income arrangements that need various calculations compared to wage earners. This sort of income often doesn't qualify under the"one size fits all" conventional/government underwriting standards.
Borrowers must verify ATR for all Non-QM while Hard Money Lenders do not require verification.
Rate and fees of Non-Qm are lower than hard money rates
Non- Qm LTV is higher than Hard money loan
Non-Qm loan duration usually is 30 years and fully amortized loan while hard money is short terms 1-25 years and can be interest-only
No Balloon payments on Non-Qm – 95% of all hard money loans have balloon payments
Non-Qm lenders consider credit and income during the approval process; Hard Money underwriting relies upon the property equity and pays less attention to other factors.
Some consider Non-Qm a bridge between Conventional loans and hard money loans. Check out Hard Money Secrets and 7 misconceptions about hard money loans.
Non-Qm are the predecessors of the subprime loans that were popular before the real estate crash of 2008
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