Non-qualified mortgages are designed to help non-traditional borrowers secure the funds they need, minus the hassle. But before you apply, finding a reputable lender with flexible solutions and competitive rates is vital to serve you. In this guide, you’ll discover more about how non-qualified mortgages work, how they differ from qualified mortgages and what to look for in non-qualified mortgage lenders when researching options.
Traditional and NQ Mortgage Loans
What is a Non-Qualified Mortgage Lender?
Non-qualified mortgage lenders offer flexible solutions to borrowers who wouldn’t otherwise qualify for a traditional home loan. These include self-employed borrowers, real estate investors, foreign nationals, retirees looking to buy a second property and high net worth individuals with lower incomes.
Non-QM (Non-Qualified) Mortgage vs. Qualified Mortgage
Qualifying mortgages are required to meet guidelines set forth by the Consumer Financial Protection Bureau (CFPB). Lenders must determine your ability to repay by considering these factors:
- Your source of income and if it’s steady and verifiable
- Your work history and if you’ve been employed in the same industry for at least two years
- Your debt-to-income (DTI) ratio and if it’s acceptable, preferably no more than 43- or 50% in some cases
- Your credit score, credit history and if it’s acceptable
Non-qualified mortgages aren’t subject to these criteria. Furthermore, lenders often extend mortgages to borrowers with high DTIs and recent credit events. You may also be eligible for a loan with a term that spans beyond 30 years or comes with an interest-only or balloon payment structure.
You should also know that non-qualified mortgages aren’t backed by the federal government, like FHA and VA loans, and you won’t be required to submit a mountain of documents to get approved. In fact, some loan products do not require income verification.
Who Can Benefit from Non-Qualified Mortgage Lenders?
Poor Credit History
Some non-qualified mortgages cater to borrowers with recent credit events, like short sales, foreclosures, deeds-in-lieu and bankruptcy. So, you won’t have to wait several years for these items to fall off your credit before applying for a home loan.
Many non-qualified mortgage products come with a streamlined application process, and you won’t have to submit a ton of paperwork to an underwriter. Instead, you may only be asked to provide bank statements or account statements if you’re using liquid assets to qualify. There’s also the possibility that you’ll have to provide projected income statements if you’re seeking a loan to purchase an investment property.
High Debt-to-Income Ratio
Most traditional mortgage products are reserved for individuals that have DTIs no greater than 43%, although up to 50% is permissible in some instances. But with a non-qualified mortgage, you may be eligible for a loan with an even higher DTI if there are other compensating factors.
Traditional and NQ Mortgage Loans
Interest-only loans are another option many non-qualified mortgage lenders offer. Instead of making monthly principal and interest payments over the loan term, you’ll only pay interest at the beginning of the loan. Consequently, you’ll get a much more affordable mortgage payment to start.
Things to Look for in Non-Qualified Mortgage Lenders
Ease and Accessibility of Application
- Can you apply online, or are you required to call in and speak with a loan officer?
- Is there an online dashboard to monitor the status of your application?
- Are you allowed to upload documents online for underwriting review?
Interest Rates and Fees
- What lender fees can you expect?
- Are the interest rates comparable to what other lenders are offering for similar loan products?
Loan Limits and Terms
- Are the loan limits high enough to cover your anticipated purchase price?
- Are the loan terms limited to 30 years, or can you borrow the funds for up to 40 years?
- Are there prepayment penalties should you decide to pay the loan off early?
- Does the lender offer both non-qualified and qualified mortgages?
Customer Service and Feedback
- Does the lender have extensive experience and industry knowledge?
- What are other sayings about the lender?
Contact a Non-Qualified Mortgage Lender
If a non-qualified mortgage makes sense for your financial situation, consider working with Angel Oak Home Loans. It’s a full-service mortgage lender that provides innovative home loan products to both traditional and non-tradition borrowers.
Home loan offerings include:
- Traditional loans: Conventional, FHA, USDA and VA home loans
- Non-qualified mortgage loans: Asset Qualifier, Bank Statement, Foreign National, Investor Cash Flow, ITIN, Jumbo and Portfolio Select home loans
Get started with Angel Oak Home Loans today by completing the online form. There’s no credit check, and it won’t take much of your time. Simply provide your name and contact information, answer a few additional questions, and a loan officer will reach out to discuss your funding needs.