Non-Qualified Mortgage Loans In Tacoma

What is a Non-Qualified Mortgage?

A non-qualified mortgage (Non-QM) is a mortgage loan that does not satisfy the criteria set forth by the CFPB Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule). This rule requires creditors to determine a consumer’s ability to repay a mortgage loan in good faith. It defines various categories of “qualified mortgage” loans, which are afforded certain safeguards. Non-QM loans, in contrast, do not meet these criteria and are therefore referred to as non-qualified mortgages.

Non-QM loans offer greater qualification flexibility, including alternative methods such as bank statements and rental income. There may be fewer restrictions, lower credit score requirements, and lower down payment alternatives. Despite these benefits, there are repayment risks, particularly during economic recessions. 

Pros and Cons of Non-QM Loans

Non-QM loans are flexible and available to borrowers who may not qualify for conventional loans but come with higher costs and risks. Before making a choice, individuals must thoroughly understand the terms and affordability of Non-QM loans.

Pros of Non-QM Loans

• Multiple Property Ownership

Non-QM loans are ideal for real estate investors since they allow for multiple property ownership, which is not always possible with conventional loans.

• Flexibility

Non-QM loans provide flexibility through alternate documents, making it possible for individuals with unusual income or a short credit history to qualify. They serve many borrowers, including individuals who have had recent negative credit occurrences.

• Lenient Requirements

Non-QM loans feature permissive credit and income guidelines, making them suitable for persons with marginal credit or unusual income sources.

• No Income Verification

Non-QM loans do not require typical income verification, making them ideal for self-employed individuals or those earning a living through the gig economy.

• Faster Approval

They have a faster approval process than Qualified Mortgages (QM), which may necessitate considerable documentation.

Cons of Non-QM Loans

• Higher Costs

Non-QM loans typically have higher interest rates and origination fees than conventional loans. Additionally, they usually call for larger down payments.

• Higher Default Risks

Non-QM loans have a higher chance of default due to their flexibility. Before choosing a Non-QM loan, borrowers should assess their ability to repay the loan.

• Limited Availability

Non-QM loans may be more challenging because not all lenders offer them. Potential borrowers may need additional research to locate Non-QM lenders and loan products that meet their needs.

Types of Non-QM Loans

The different types of Non-Qualified Mortgage loans are as follows:

• Foreign National Loans

These loans are for foreign nationals with established U.S. residency. These loans have lower interest rates, but three years of residence and a background check are required.

• Non-Owner Occupied Loans

These are investment property loans.

• Bank Statement Loans

Instead of typical tax records, these loans use the borrower’s bank statements to verify their income. They are popular among self-employed individuals and freelancers. 

• Investor Cash Flow Loans

These are intended for real estate investors and are typically granted based on the predicted cash flow of the property.

• 1099 Income Loans

These loans consider 1099 income for mortgage qualification purposes for borrowers who earn income via 1099 contracts.

• ITIN Loans

This applies to borrowers with an Individual Taxpayer Identification Number (ITIN) rather than a Social Security Number. 

• Asset Based Loans

These loans are approved based on the value of the borrower’s assets. They are appropriate for wealthy individuals who may have different sources of income.

• Stated Income Loans

These are loans in which the borrower declares their income but needs to provide typical verification. This is useful for self-employed people or those with complicated income structures. 

• Interest-Only Loans

These loans let the borrower pay only the interest part of the loan for a predetermined time. This can be advantageous for specific borrowers but also involves hazards because the principal remains unchanged.

• DSCR Loans

Loans based on the Debt Service Coverage Ratio (DSCR) are utilized for investment properties. Approval is contingent on the ratio between the property’s net operating income and the proposed loan payment.

Who Benefits From Non-QM Loans?

Non-QM loans are primarily intended for borrowers with unusual circumstances, higher debt-to-income ratios (DTI), or low credit scores who may not be eligible for qualifying mortgages. While QM loans have tight guidelines, Non-QM loans have a more liberal qualification process.

These loans often have higher interest rates than QM loans and may include additional features such as longer terms and flexibility with risky elements. They are appropriate for those who fall outside the norm, such as self-employed individuals, high-net-worth individuals, investors, those with recent bad credit, foreign nationals, and those interested in interest-only payments.

Apply for a Tacoma Non-Qualified Mortgage

Homebuyers in Tacoma can benefit significantly from Capital Home Mortgage’s non-qualified mortgage loans. Capital Home Mortgage specializes in providing non-QM loans that offer alternative financing options for borrowers with non-traditional income sources, such as self-employed and retired borrowers. We provide non-QM loans with low-interest rates and fees and superior customer service. Our professional team guides consumers through the non-traditional mortgage path, providing individualized solutions and dependable alternatives, making the home-buying process more streamlined and accessible.

Call 803-600-0088 to speak with our Tacoma Home Loan Specialists about the eligibility requirements of Non-Qualified Mortgage Loans in Tacoma.