Non-QM loans are not backed by Freddie Mac and Fannie Mae – two government-sponsored enterprises that establish credit requirements for a traditional mortgage loan. Next, let’s talk credit score and history. The lender’s underwriting team will peruse these statements to determine the borrower’s regular cash flow and loan affordability. On a bank statement loan, in lieu of a traditional W2, Non-QM lenders use 12-24 months of a borrower’s personal or business bank statements to document income. Traditional mortgage providers use W2 forms to verify borrower income and to help determine loan affordability.īoth traditional and Non-QM mortgage lenders use a borrower’s monthly income stream to evaluate loan affordability. These loans may be ideal for self-employed borrowers who don’t receive a W2 tax form from an employer. The most popular alternative to a traditional mortgage is a bank statement loan. Personal and business bank statement Non-QM loans. For this article, we’ll focus on bank statement and DSCR Non-QM loans. There are other types of Non-QM mortgages such as Asset Utilization loans - a specialized product for high-net worth borrowers and those with significant assets that can be used to qualify for the loan. Loan amounts vary from one Non-QM lender to the next but can be as high as $2 million and certain lenders can close these loans in as little as 15 days (this can be a significant advantage if there is competition for the property). Loan amounts vary from one Non-QM lender to the next but can be as high as $3 million.ĭSCR loans are business purpose loans used by investors to purchase a rental income-generating property. The most popular Non-QM loans are personal and business bank statement loans, and DSCR (Debt Service Coverage Ratio) loans.īank statement loans can be used to buy a primary or secondary residence, or an investment property. Yes, borrowers must still qualify for a Non-QM loan, but the criteria for applying for and obtaining these loans are different - not only from those required for a traditional mortgage, but they also vary among different types of Non-QM loans. Every year, millions of borrowers who can’t get a traditional mortgage turn to a non-qualified mortgage (Non-QM) provider to purchase or refinance a home.
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