What is a NonQM Loan?
Any non-traditional loan product available in the marketplace is generally referred to as a "Non-QM" loan.
These loans include those attached to properties that don't qualify for conventional financing such as non-warrantable condos, homes with excessive acreage or unique features, and condotels. In addition, Non-QM loans also cover borrowers with unique finances. Loans using bank statements for income, or for borrowers recovering from recent derogatory credit events like bankruptcy or foreclosure also fall under the Non-QM umbrella.
These loans are a tremendous options for anyone that falls into an "outside the box" scenario that more traditional lending services.
NonQM Mortgage FAQ's
Are NonQM Loans SubPrime Loans?
Non-QM loans don't fit the traditional mortgage box, but when compared to what most people remember as "Subprime loans", the products available in the Non-QM spectrum today are designed to meet unique borrower needs, NOT to lower the standards of a loan approval.
Unlike the subprime loans of the early-mid 2000s, today's non-QM loans avoid layering risk. For example, if a client has lower FICO scores, they'll often be capped in how much they can borrow. If they don't have a large down payment or equity in their home, they'll likely need a good credit score to qualify for today's products.
What Makes a Loan "Non-QM"?
A number of factors can make a loan fall under the Non-QM umbrella. Typically, anything underwritten outside of conventional or standard government (FHA, VA, USDA) guidelines is considered Non-QM.
Loans where a borrower qualifies using bank statements for income are common Non-QM programs. Loans for unique properties like those with excessive acreage, non-warrantable condos, or condotels are other popular Non-QM loans.
Others include loans to Foreign Nationals, loans for borrowers with recent bankruptcy or foreclosures, and Jumbo loans exceeding conventional loan limits.