How To Find the Best Non QM Loans

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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Are you having trouble qualifying for a traditional mortgage? A Non-qualified mortgage (Non QM) could be a suitable alternative. If you aren’t familiar with what they are and how they work, read on to learn how they differ from other types of loans, along with key considerations to be mindful of. You’ll also learn how to evaluate Non QM loan offers to find the best fit. 

Traditional and NQ Mortgage Loans

 
Are you looking to finance a home too expensive for a conventional loan? An Angel Oak Jumbo Loan can provide financing for up to $3.5 million.

Non-QM Loans vs. Other Types of Loans: Key Differences

A Non-QM loan is a mortgage product that does not adhere to traditional mortgage standards. In other words, it fails to meet the requirements to be categorized as a qualified mortgage.

Most mortgage products are accessible if you have traditional employment and prove it through pay stubs, W2s and bank statements. However, Non-QM loans cater to these types of borrowers:

  • Borrowers seeking mortgages that exceed the conforming loan limit
  • Self-employed borrowers who are unable to qualify with tax returns
  • Individuals who have less than two years of verifiable employment history 
  • High-net-worth individuals without high monthly incomes
  • Retirees looking to buy a vacation home or investment property
  • Real-estate investors and foreign nationals 

With Non-QM loans, you can expect higher lender fees and unconventional payment structures, like a balloon or interest-only payments. Some lenders also offer loan terms that surpass 30 years and will approve you if you have a higher debt-to-income ratio (DTI).

Another key distinction between Non QM and other types of loans is the guidelines related to the ability to repay rule. Qualified mortgages are only available to borrowers who: 

  • Have at least two years of verifiable, steady employment history
  • Have ample income to make mortgage payments 
  • Have DTIs no greater than 50 percent
  • Have a solid credit rating and credit history that’s free of recent foreclosures or bankruptcies 

But with a Non-QM loan, these rules don’t always apply. Still, you may need good or excellent credit to qualify for a loan.

Are Non-QM Loans More Expensive than Other Loans?

These debt products pose a higher risk to lenders. So, you can expect to pay higher lending fees and interest rates with Non QM loans. In addition, if you’re an investor, you may find that the lender charges prepayment penalties if you opt to pay the loan off early. 

Traditional and NQ Mortgage Loans

 
Are you looking to finance a home too expensive for a conventional loan? An Angel Oak Jumbo Loan can provide financing for up to $3.5 million.

Things to Consider in Finding the Best Non-QM Loans

When evaluating Non QM loan options, here are some questions to ponder:

Loan Requirements

  • What are the minimum credit score requirements and maximum allowable DTI? 
  • How much of a down payment is needed to secure a loan? 
  • What types of documentation are required to apply for a loan? 
  • What types of properties can be purchased with the loan proceeds? 
  • Are past credit issues ok? If so, what are the seasoning criteria for adverse credit items (i.e., short sales, foreclosures, bankruptcies and deeds-in-lieu)?

Pricing and Costs

  • What lending fees can you expect, and are they comparable to what other lenders are charging for similar Non QM mortgage products? 
  • Are both fixed and variable interest rates available? 

Loan Terms

  • What are the minimum and maximum loan amounts? 
  • Are loan terms limited to 30 years, or does the lender offer more flexible options? 

Product Diversity

  • Does the lender have several Non QM loan products to choose from? 

Lender’s Reputation and Service Quality

Unfortunately, some lenders are only interested in turning a profit and aren’t committed to going the extra mile for their customers. So, it’s vital to evaluate reviews from past and current customers to gain insight into their reputation and the quality of service they provide. 

Ensure That You Are Getting the Best Non-QM Loans

It can be challenging to find a reputable Non QM lender. Luckily, Angel Oak Home Loans has you covered with an assortment of options to choose from, including: 

  • Asset Qualifier Home Loan: ideal for borrowers with a substantial amount of liquid assets, including checking accounts, savings accounts, retirement accounts and stock 
  • Bank Statement Home Loan: bank statement loans let self-employed borrowers qualify for a mortgage using personal or business bank statements 
  • Foreign National Home Loan: available to investors who reside outside of the United States and want to use projected cash flow on a property to qualify for a mortgage
  • Investor Cash Flow Loan: caters to real estate investors and doesn’t require employment or income verification
  • ITIN Home Loan: reserved for borrowers who don’t have a Social Security number and need to use their Individual Tax Identification Number (ITIN), instead
  • Jumbo Home Loan: a viable option if you’re seeking a home loan for more than the conforming limit 
  • Portfolio Select Home Loan: a mortgage option for individuals who are only one year removed from foreclosure, deed-in-lieu or short sale and two years removed from bankruptcy

If none of these Non QM loans work for you, Angel Oak Home Loans also features other flexible mortgage products, like conventional mortgages and government-backed mortgages. Inquire today by submitting an online inquiry. A licensed mortgage professional will reach out to discuss your needs, home loans that could be a good fit and the next steps in the application process.

Angel Oak

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