Nickle City Mortgage works with a wide range of borrowers seeking to buy a home. Our Orchard Park, NY staff are standing by to help with any questions you have. This week, we are here to address some frequently asked questions we get for Non-Qualified Mortgages (also known as Non-QMs). Feel free to contact us for any additional needs you have.
1) What is a Non-QM?
A Non-QM is short for a Non-Qualified Mortgage. This type of mortgage does not meet the Consumer Financial Protection Bureau (CFPB) requirements pertaining to certain mortgages, hence the name “non-qualified.”
2) What is a Qualified Mortgage?
Under legislation within the Dodd-Frank Wall Street Reform and Consumer Protection Act, a set of guidelines were released to qualify mortgages. The rules were passed largely in response to the housing mortgage crisis. Guidelines mainly focus on the borrower’s ability to repay the debt. The standards also define certain loan terms that meet the CFPB criteria for qualification. Some of the regulations include loan terms under 30 years, caps on fees for loans, and limitations on interest-only loans or “balloon” loans.
3) Why Would I Want a Non-QM?
Certain home owners will consider a Non-QM if they have unusual income sources that may hinder their ability to qualify for a standard loan. You may also be self-employed and have nontraditional methods of showing your ability to repay a loan. Alternatively, you may wish to purchase the home quickly and do not wish to wait for approval of a qualified mortgage. In qualified mortgages, you can only meet guidelines if you have less than 43% debt-to-income ratio.
4) How Do I Get a Non-QM?
First, you can apply for a qualifying mortgage and see if you are approved through automated underwriting for a more traditional loan program. If you are rejected, you can then start comparing rates and look for lenders that will provide you with a Non-QM. You should review any extra costs you will be expected to pay, and, look out for any unusual loan terms.
5) How Do I Get a Non-QM?
Having a Non-QM does not always mean you will have a high-risk loan. It simply means you will not be working in the complex regulations for qualified mortgages. If you need an interest-only loan, then you will need a Non-QM. As with any major financial decision, you will want to review the terms and conditions very carefully before you commit. Be sure to compare different rates and products. Some people still need a high credit core to qualify for a Non-QM.
Nickle City Funding in Orchard Park New York has a team of experienced professionals waiting to answer more of your questions about Non-QMs. We are happy to help homebuyers in the area and look forward to your call!