Abilene Non-Qualified Mortgage

It’s typical to encounter issues when applying for a mortgage with a traditional lender; these issues only stall the application process and ultimately result in your application being rejected. If you’re self-employed, your application might be rejected immediately, even if you have a high credit score and a long credit history. 

Capital Home Mortgage believes that not all borrowers who fail to meet lender requirements are high-risk. This is where our non-qualified mortgage options come in.

Qualified vs. Non-Qualified Mortgage

One of the main distinctions between qualified and non-qualified mortgages is the degree to which they adhere to consumer protections established by the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB). These measures regulate interest rates and fees on home loans and require lenders to verify a borrower’s ability to repay the loan to avoid overborrowing.

A qualified mortgage (QM) conforms to the following criteria:

• Review and verification of borrower’s income and debts

• Negative amortization, interest-only loans, or balloon payments are not allowed.

• Limited up-front fees, points, and annual percentage rate (APR).

• A maximum loan term of 30 years.

Non-qualified mortgages (Non-QM) circumvent one or more of the guidelines mentioned earlier by employing alternative income verification methods to assist borrowers in obtaining mortgage approval. Non-QM comes in handy to those who have found their dream home but cannot meet qualified mortgage standards. They are ideal for: 

• Self-employed borrowers;

• High net-worth borrowers;

• Rental-property investors;

• Individuals with bad credit;

• Foreign nationals;

• Borrowers seeking an interest-only payment option.

Some common features of a non-qualified mortgage include the following:

• Up to 40-year term 

Payments are spread over 40 years to lower monthly premiums, which could mean higher interest rates and overall mortgage costs.

• Fewer documentation requirements

Use bank statements or even stated income instead of tax returns and pay stubs to prove your income, which requires less supporting documentation.

• Higher maximum allowable DTI

You may still qualify for a non-QM loan even if your monthly debt payments amount to more than 43% of your gross income.

• Jumbo loans

Originates mortgages that exceed the Fannie Mae and Freddie Mac limits of $647,200 for a single-family home.

• Recent credit event loans

People who have recently experienced financial hardships, such as bankruptcy or foreclosure, have a shot at qualifying for non–QM mortgages.

Benefits and Drawbacks of Non-Qualified Mortgages

A non-QM mortgage has both benefits and drawbacks, just like any other type of loan. Weighing the following pros and cons of a Non-QM carefully will help you make a wise choice. 

Pros:

• Less stringent credit requirements 

One of the most significant advantages of non-QM loans is that they are available to people with low credit scores, allowing them to realize their goal of becoming homeowners.

• Requires less documentation

They usually won’t require proof of income, tax returns, or W-2s. Non-QM lenders accept alternative proof of income such as bank statements, P&L statements, or proof of liquid assets.

• More flexible loan terms

Loan terms greater than 30 years, interest-only payments, and negative amortization are possible with non-QM loans but not with QM loans.

Cons:

• Higher interest rates

Non-QM loans typically have higher interest rates and fees than QM loans because they pose a higher lending risk. 

• Harder to find

Non-QM loans may have limited availability because not all mortgage lenders provide this option. You can search for non-QM lenders online and conduct research before making a decision.

• Greater Risk of Default

Some QM loans, like interest-only loans, increase a borrower’s default risk.  

• Higher Down Payments

Non-QM loans may have limited availability because not all mortgage lenders provide this option. You can search for non-QM lenders online and conduct research before making a decision.

We Offer Non-Qualified Mortgages in Abilene, TX

Capital Home Mortgage acknowledges that not all homebuyers fit the same profile. Even if you don’t bring in an ordinary income, we can still provide you with the financing you need to purchase a home or refinance your existing mortgage. 

Our team can also assist you in exploring and applying for other types of home loan products. We offer a wide selection of qualified and non-qualified mortgages to serve the varying needs of our clients. 

Want to know more about our non-qualified mortgage options? Call us today at (325) 387-8387 or apply online.