If you have applied for a home loan and did not get approved, that doesn’t mean you are out of luck. There are plenty of reasons people don’t get qualified for a home loan; whether it be due to their current financial situation or credit history, and if you’ve been working at getting approved for some time, we know that can be difficult and frustrating to say the least.
If you’ve found yourself in this situation, a non-QM or non-qualified mortgage loan, might be a solution for you. This type of loan can help you if you weren’t able to qualify with conventional methods. Due to recent rules and regulations, lenders have become a little more stringent when it comes to qualifying consumers for a home loan, and even if a consumer may look good on paper, some lenders still may not qualify for a home loan due to these standards.
A non-QM loan is any loan product that doesn’t meet the standards of a qualified mortgage. Most people are aware of the housing crisis that affected many homeowners who were victims of predatory lending, but out of that situation the QM rule was created which required lenders to offer loans with features that protected people from getting loans for homes they could not afford.
How Do I Qualify?
Below are the requirements outlined in the QM rule:
-Ability to repay: the lender must document your income and financial situation before approving you for a loan. The underwriting process must verify the following: income, employment status, monthly payment on covered transaction, monthly on any loan secured by the home, monthly for mortgage related obligations, current debt, debt to income ratio, and credit history.
-Loans cannot extend 30 years or have interest only payments
-Restrictions on fees that can increase borrowing costs
-There is a limit on how much of your earnings can be put toward your mortgage payments and other outstanding bills. This usually involves calculating your debt to income ratio.
Should I Apply?
If you are self-employed, a non-QM loan might be a good option for you. If you don’t get paid on a traditional pay period, some lenders may think you cannot afford a mortgage but a non-QM lender has flexibility with their terms so it’s possible to still get qualified in these cases.
If you are planning to invest in real estate in the hopes of turning a profit, a non-QM loan might work four you. These are often called fix and flips and work for the both the lender and consumer because they both want to keep the term of the loan as short as possible.
There are also people who want to purchase property in the United States but cannot qualify due to their residency status. Non-QM loans are a great option for those in this situation and can use credit reports from their country to get approved.
Let’s Get Started
If you are interested in a non-QM mortgage or just have some questions on the process, please feel free to reach out to one of our team members at North Star Mortgage Network in Jacksonville, FL today!