They can often qualify for a non-QM loan using bank statements rather than tax returns. Self-employed individuals often have irregular income that may come from several sources. Non-QM loans are often a good fit for those who have unique income situations: Because there is more work required to process non-QM loans, the interest rates tend to be anywhere from 0.5% to 5% higher, depending on the loan terms. All borrowers are still required to prove their ability to repay the loan. Even though these loans do not meet the standard requirements, they are not necessarily riskier loans.
Loans that meet all the new criteria are called “qualified mortgages.” Any loan that falls outside of those qualifications is called a “non-qualified mortgage” or non-QM.Ī non-QM is a mortgage loan that uses alternate methods to verify income to qualify borrowers. In order reduce risk of loss after the mortgage meltdown in 2008, federal regulators tightened borrower requirements on mortgage loans that could be backed and bought by government agencies. In these situations, a non-qualified mortgage (non-QM) may be the solution. Yet, while they may not be able to qualify for conventional loans for various reasons, these buyers may still have enough income or assets to afford homeownership. Many homebuyers do not have the standard or consistent forms of income that are typically required by mortgage lenders.
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