Starting your home-buying journey can be exciting, but even the first critical step of the process can have you questioning how to start financing a home purchase. If you’re thinking of applying for a qualified or traditional home mortgage and have a W-2 job as your source of income, then the process seems to be pretty easy.
However, if you’re a business owner, contractor, or freelancer of a 1099 employee, then getting a qualified loan may be hard for you, and you’ll need to use Non QM home loans because the majority of the insurance companies consider these types of employment as self-employment.
For self-employed people who are struggling to obtain home financing, non-qualified mortgages or non-QM home loans are greatly helpful.
Unfortunately, the majority of people are not aware of what non-QM loans are and their benefits. Keeping that in mind, we’ve prepared a full guide covering the benefits of non-QM home loans and why it might be right for you.
What exactly are non-QM home loans?
A “non-QM” loan is any mortgage that doesn’t meet the established requirements of a qualified mortgage. Borrowers who have variable or lump-sum incomes or who are self-employed as businessmen, freelancers, contractors, service employees, pensioners, actors, writers, musicians, and others, will benefit from these non-traditional loans.
There are some benefits to working with a non-QM lender, like nonqmhomeloans. Because they offer more flexibility in granting approval to certain types of borrowers than the traditional QM home mortgage lenders.
Who can benefit from non-QM home loans
Non-QM mortgages are available for creditworthy borrowers with non-traditional incomes, assets, and no earnings, borrowers with high net worth, borrowers with a bad credit score, or those who faced difficulty in applying or qualifying for a qualified home mortgage loan.
Here are the common examples of people who can benefit from these loans.
- Self-employed people
- Real estate builders and investors
- Foreign national borrowers
- Prime borrowers
- Non-prime borrowers
- Borrowers who want an interest-only payment option
- Borrowers with significant assets
What are the benefits of non-QM loans?
There are numerous benefits of Non-QM loans as compared to traditional and government loans. Some of those benefits are:
#1: Non-QM loans for everyone
Non-QM loans are for everyone despite their credit history. Everyone can choose a home mortgage package that suits them. Borrowers with strong credit, terrible credit, recent bankruptcies, previous foreclosure, previously missed payments, retired homeowners, or those without employment but considerable assets may be eligible.
#2: Open-minded policy for granting loans
Non-QM lending rules are different from traditional loan guidelines. On conventional loans, there are no special cases. Non-QM lenders, on the other hand, are more flexible and willing to grant exceptions. Before making a judgment, a non-QM mortgage inspector will check the borrower’s complete credit and financial profile.
The ability to pay back the loan is crucial. Non-QM lenders, on the other hand, will examine other sources of income.
#3: Less formal documentations
One benefit of applying for non-QM loans is that they require less formal documentation than conventional or government loans. Most of the QM-loans do not require tax returns, W-2s, or employment verification.
This is an advantage for people who don’t have a stable source of income but do have other means of paying their mortgages.
#4: Can accommodate higher DTI ratio
Non-qualified mortgages give homeowners more flexibility within the lender’s criteria, whereas other lending programs may require that your debt-to-income ratio is below a certain percentage. Non-qualified mortgage loans allow lenders to handle higher DTIs by a few percentage points than qualified mortgage loans.
Takeaway
Non-QM home loans are getting more popular day by day because of the ease they provide to people wanting to buy their own homes. These loans are for everyone, no matter their credit history or income. If you want to buy your own home, we suggest you take a Non-QM loan instead of the traditional one.
Story by Colton Barter
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