(March 29, 2019) Just like ocean waves, the mortgage finance industry has crests and valleys as it relates to accessibility.
But in the past few years, the accessibility is reaching a crest, for example, with the resurgence of Non-Qualified mortgages (non-QM).
Non-QM is any home loan that doesn’t comply with the Consumer Financial Protection Bureau’s existing rules on Qualified Mortgages. In other words, non-QM is a designation given to loans that fall outside the guidelines of Fannie Mae, Freddie Mac, or Ginnie Mae.
In a Qualified Mortgage, there are well-defined requirements and these government agencies protect the lender when a borrower becomes unable to afford their mortgage payments.
Non-QM loans are designed to help a group of people achieve homeownership where they otherwise could not. Some alternative Non-Qualified loans available now include:
•Loans that give the options for primary home buyers to purchase a home using 100 percent financing through a conventional loan program with no monthly mortgage insurance or funding fees
•Loans where bank statement deposits can be used as income and where the investment income on rental properties can be used to qualify buyers for that specific property.
There are still restrictions and credit requirements, but not aggressive ones, for example the minimum credit score for the 100 percent conventional financing program is 660.
Now, before you get too nervous, we are heading down the same road as before the real estate market crashed, there are more protocols in place this go-around.
“This time around, there is more control over the loans and they are being directed to investors who are knowingly and willingly investing in this type of loan and buyer,” said Jason Cook, Eastern Shore manager of Embrace Home Loans out of Ocean City.
The market for this type of loan typically includes individuals experiencing one or more of these unique circumstances:
•Self-employed for less than two years
•Self-employed and not showing a great amount of income on tax returns
•High debt ratio yet plenty of reserves to make up for the debt ratio
•Blemished credit due to unforeseen circumstances during the downfall of the economy
Given the proper protocols, guidance and care, these loans will be a valuable asset to those just on the fringe of qualifying for your traditional mortgage programs.
– Lauren Bunting is an Associate Broker with Bunting Realty, Inc. in Berlin.