Non-QM Mortgage Lenders
Non-Qualified Mortgages (Non-QM) are designed for good borrowers with good credit and unique financial circumstances; self-employed borrowers that cannot show their income documentation, tax returns, schedules, 1040, etc. or have less than 2 years of self-employment history. Also, for those that have a greater than 43% Debt-to-Income ratio (DTI). There are additional as well as flexible amortization terms including Interest-Only.
Non-QM mortgage programs including Non-Prime can also be for borrowers that have imperfect credit i.e. An unseasoned "life event" such as bankruptcy, foreclosure, short sale, late payments, limited credit. All Non-QM mortgages are manual underwrite programs.
Qualified Mortgages (QM) and Non-Qualified Mortgages (Non-QM)
There are 2 types of mortgages in the United States, Qualified Mortgages (QM) and Non-Qualified Mortgages (Non-QM). Some qualified mortgages are insured by the government and are essentially provided by the government; these are called agency mortgages and they include:
Federal National Mortgage Association (FNMA), aka "Fannie Mae", Government National Mortgage Association (GNMA), aka "Ginnie Mae", Federal Home Loan Mortgage Corporation (FHLMC), aka "Freddie Mac", Federal Housing Authority (FHA), Veterans Administration (VA). These types of lenders are often referred to as "agency lenders" or "government lenders". Fundamentally speaking, Non-Qualified mortgage lenders/loan programs, by nature, are different and are derived from the private sector.
Self-employed borrowers often have unique financial situations and/or credit profiles which in-turn can mean a complex or complicated tax return, etc. Therefore, it is critical we have these alternative income documentation programs to make possible the opportunity of home ownership for the self-employed.
Non-QM mortgage program underwriter guidelines for these types of loans are based on the borrower's "Ability to Repay" (ATR). The Ability-to-Repay rule is about evaluating the worthiness of the borrower and general ability to repay the loan. In large part, this is substantiated by documented cash-flow and or liquid reserves. Common-sense underwriting. All Non-QM mortgage loans require manual underwriting; from a subjective point of view.
Non-QM Mortgage Lending
Non-QM mortgage loans, in terms of pricing, guidelines and availability are more subject to the private market sector and are based on market performance. So, when your Loan Officer tells you he or she doesn't need your tax return, it's not only because he's a good loan officer, but because the borrower before you are paying their mortgage on time. Nothing is more evident as to how legitimate or viable a loan program is by the way it performs in the marketplace.
Non-QM Mortgage Income and Employment Documentation
Non-QM mortgage lending is about alternative documentation in the areas of income documentation as well as employment.
Non-QM Underwriting Logic
Non-Qualified mortgage underwriting guideline attributes provide flexibility to the responsible underwriter and in effect empower the self-employed business professional to take part in the American dream of owning real estate. To expect a business owner to produce traditional income documentation in order to qualify for a home loan doesn't make sense. These programs are about flexibility, basic opportunity, and justified results. The Ability-to-Repay is about evaluating the worthiness of the borrower and general ability to repay the loan; common-sense underwriting and sometimes common-sense manual underwriting. It is not logical to expect a self-employed borrower to produce conventional income documentation to qualify for a home loan. It is not logical to expect a self-employed borrower to produce conventional income documentation to qualify for a home loan. Agency lender guidelines prevent self-employed people from purchasing real estate or refinancing their home. Non-Qualified mortgages provide lenders the opportunity to benefit the underserved and often self-employed borrower by providing alternative home loan programs, an alternative to the checkbox underwriting capacity of an agency lender.
Non -QM Mortgage underwriters look for responsible ways to approve a loan because they can because they are make-sense decision-makers. Agency lender underwriters reach for reasons to decline a loan and are more like order-takers. A successful business owner didn't achieve their success by accepting decline notice from an order-taker. Successful entrepreneurs figure out how to get stuff done. This spirit of determination is synonymous with the progressive nature of Non-QM lending.