Non-QM Mortgage Lenders
Non-Qualified Mortgages (Non-QM) are designed for good borrowers with good or re-established credit. Self-employed borrowers who cannot show their income documentation, tax returns, schedules, 1040, etc. Or have less than 2 years of W2 or self-employment history. Any employment type (W2, self-employed, investor) with a greater than 43% Debt-to-Income ratio (DTI) can qualify. Additional options include 1-year employment history as well as flexible 40-year amortization terms with Interest-only.
Non-QM mortgage programs including Non-Prime can also be for borrowers that have imperfect credit i.e. Unseasoned "life credit event" such as bankruptcy, foreclosure, short sale, late payments, limited credit. All Non-QM mortgages are manual underwritten programs.
Qualified and Non-Qualified
There are 2 types of mortgages in the United States and can be categorized as 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, rules and guidelines, are different in that the non-qm lending space is derived from the private market sector and not hindered by government regulation and mortgage-backed securities standards.
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 simply to make possible the opportunity of homeownership for the self-employed consumer. Non-Qualified mortgage programs supply lenders the opportunity to help benefit the underserved and often self-employed borrower by providing alternative home loan programs, an alternative to the checkbox underwriting ability of an agency lender.
Non-QM Mortgage Income and Employment Documentation
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 to assess the value of the borrower and the general ability to repay the loan. This is largely justified 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 lending is about alternative documentation in the areas of income documentation as well as employment. Non-QM mortgage loans, pricing, guidelines, and availability are more private-market-based and based on market performance.
Non-QM Underwriting Logic
It is not logical to expect a self-employed borrower to produce traditional income documentation to qualify for a home loan.
Non-QM Mortgage underwriters look for responsible ways to approve a loan 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 a decline notice from an order-taker. Successful entrepreneurs find out how to get things done. This spirit of determination is synonymous with the progressive nature of Non-QM lending.
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. Expect a business owner to produce traditional income documentation to qualify for a home loan makes no sense. These programs are about flexibility, basic opportunities, and justified results.