NON QM LOANS
What are Non-QM Loans and How do I qualify?
What are Non QM Loans?
A Non-Qualified Mortgage (Non-QM) is a loan that doesn’t meet the standards of a qualified mortgage and uses non-traditional methods of income verification to help a borrower get approved for a home loan.
What is DSCR in mortgage?
The debt-service coverage ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. DSCR is used to analyze firms, projects, or individual borrowers. The minimum DSCR that a lender demands depends on macroeconomic conditions. A DSCR loan is just one example of Non-QM Loans.
Who Are Non-Qualifying Loans For?
Every so often, borrowers find themselves in one of three circumstances that best fit a Non-QM loan:
- Borrowers with credit blemishes.
- Self-employed borrowers with lots of income tax write-offs.
- Investors wanting to buy rental or vacation home properties.
Self-employed borrowers frequently face more difficulty than traditional wage-earning borrowers. A Non-QM mortgage loan can help these borrowers with other documents, such as bank statements, be eligible for a loan.
Non-QM Mortgage Loan Benefits
Non-QM mortgage loans are advantageous to borrowers for several reasons, including:
- Better underwriting flexibility
- Personal income calculations are not required
- Job history is not required (in some cases)
- As little as 10% down required
- Credit scores as low as 620 allowed (580 w/ compensating factors)
- No reserves required (in some cases)
- Low debt-service-coverage ratio (DSCR) on investment properties
- Counting rental income (including Airbnb & VRBO)
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- Better underwriting flexibility
- Personal income calculations are not required
- Rental income can count toward loan (including Airbnb & VRBO)
- Credit scores as low as 620 allowed
