What is a Non-QM Loan?
A Non-QM loan is a type of mortgage loan that is not backed by Fannie Mae or Freddie Mac, meaning that it is not subject to the same underwriting guidelines as traditional mortgage loans. Non-qualified mortgages often do not meet standard mortgage underwriting rules, such as debt-to-income ratio requirements. They are still approved due to other factors such as the borrower's credit score or income history. California Home Solution specializes in non-QM lending for self-employed and investor clients across Los Angeles and the San Fernando Valley, including bank statement loans, DSCR loans for rental properties, and asset-based qualifying.
Who is eligible for a Non-QM Loan?
Non-QM loans are designed for borrowers whose income or situation does not fit traditional Fannie Mae or Freddie Mac guidelines. This includes self-employed borrowers, business owners, real estate investors, and those with variable or commission-based income, many of whom have strong credit but cannot easily document income the traditional way.The eligibility for this varies based on the specific requirements of the lender.
What are the benefits of a Non-QM Loan?
Non-QM loans offer many benefits to borrowers who may not qualify for traditional mortgage loans. Non-QM loans often offer more favorable terms compared to other loans that fall outside traditional guidelines. Borrowers may be able to secure a lower interest rate or pay a lower down payment, making homeownership a more achievable goal. This program also offers a viable solution for self-employed individuals whose income fluctuates month to month.
What are the requirements for obtaining a Non-QM Loan?
Non-QM loans vary based on the individual requirements of the lender, but there are certain factors that are common across most non-qualified mortgage issuance. Borrowers will need to provide documentation verifying their income, employment history, and credit score. Non-QM loans also often carry higher interest rates and fees than traditional mortgage loans, as they are considered riskier by lenders.
Borrowers should also expect to go through a more thorough underwriting process, as lenders will want to be sure that they can afford to repay the loan.
It is also essential to note that Non-QM loans will require a significant down payment when it comes to financing the loan. While the exact percentage may vary, borrowers should expect to pay up to 20% of the home's purchase price as a down payment.
California Home Solution, Inc. is a licensed California mortgage broker (NMLS #260091, DRE #01303675) based in Woodland Hills, serving the greater Los Angeles area since 2000.
Contact California Home Solution, Inc today to learn if a Non-QM Loan is right for you!
Frequently Asked Questions
What is a Non-QM loan?
Non-QM stands for Non-Qualified Mortgage. These are loans that do not fit the strict rules of a conventional or government loan, which makes them the right fit for borrowers with real income that traditional underwriting does not capture. Non-QM is not a lower-quality loan. It is a different way of proving you can afford the mortgage.
Who benefits from a Non-QM loan?
Non-QM loans are built for people the traditional system leaves behind, including the self-employed and business owners, borrowers who do not declare much income on their taxes, people with lower or damaged credit scores, and anyone who cannot meet standard conventional qualifications. If a bank has told you no, a Non-QM program is often the path to yes.
What types of Non-QM loans do you offer?
We offer a full range of Non-QM programs, each built for a different situation:
- Bank Statement Loans: qualify on your bank deposits instead of tax returns, built for the self-employed.
- DSCR Loans: qualify on a rental property's income instead of your personal income, built for investors.
- Profit and Loss Loans: qualify using a profit and loss statement prepared by your CPA, with no tax returns required.
- Asset-Based Loans: qualify using your liquid assets when you have wealth but limited monthly income.
- 1099 Loans: qualify using your 1099 forms if you are an independent contractor.
Are Non-QM rates higher than conventional loans?
Non-QM rates typically run somewhat higher than a conventional owner-occupied loan, because the lender is taking a more flexible view of how you qualify. For most Non-QM borrowers the tradeoff is worth it, because the alternative is not qualifying at all. Because we shop many lenders, we compare programs to find the best pricing for your scenario.
Is a Non-QM loan permanent, or do I refinance later?
It can be either. Many borrowers keep their Non-QM loan for the long term. Others use it to buy or refinance now and move into a conventional loan later once their tax returns or credit catch up. We help you plan for whichever path fits.
