This loan program is considered Non-QM or Non-Qualifying because it does not qualify to adhere to stricter governmental standards of QM mortgages (or Qualifying Mortgages) that conform to that standards set by FNMA and FHLMC (Fannie Mae and Freddie Mac) and HUD (Department of Housing and Urban Development). By having this program more neutral and independent, it does not make it a riskier program but rather making it a different qualification standard that would work well for those who don't qualify for a Conventional or QM Loan.
Here are the various ADVANTAGES of NON-QM Loans:
- Easier Income Verification Standards
- Higher Loan Amounts Acceptable
- Lower FICO Scores Can Be Acceptable
- Fixed Assets Can Be Used to Qualify
- Higher LTV Range Acceptable (with Income/Revenue)
- LLCs, Corporations and Trusts Can Qualify
- Can be used for Residential and Commercial Loans
- Investment & Income-Generating Properties Can Qualify
- No Mortgage Insurance Requirements (PMI)
- Good for Self-Employed Borrowers & Business Owners
- Distressed Property Owners & Bankruptcies May Qualify
- Can Work for Asset-Based Buying & Prime Credit
Loans that go above a certain QM / qualifying loan amount and if DTI is above a certain set % value-limit, then those are considered Non-QM Jumbo Loans which can become a good option for certain borrowers who need a bigger residential loan.
Nowadays, there are even more and more of wholesale direct lenders who have Non-QM as a viable/better alternative to certain other loan programs. Or also, Mortgage & Finance Broker companies benefit by offering such program via direct lenders in order to create a diverse portfolio of loan products that borrowers can choose from.
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