14
Oct
By First Rate Financial Group
Mortgage

A Non-QM Mortgage: What Does This Mean?

A Non-QM Mortgage: What Does This Mean?If you are interested in purchasing a house, you need to review all of the offers available. The vast majority of loan officers are going to talk about something called qualifying mortgages, which is usually shortened to QM. You may be asking, what is a non-qualifying mortgage? This is usually shortened to Non-QM, and it simply means that the loan does not conform with the rules and regulations put in place by the Consumer Financial Protection Bureau, usually shortened to CFPB. What are the differences between a QM and Non-QM mortgage, and which one is right for your needs?

A Qualified Mortgage Generally Provides More Protection

In general, a qualified mortgage (QM) typically provides you with a greater degree of protection. The loan has to conform to certain standards. This means that the loan cannot last longer than 30 years, there cannot be any prepayment penalties, it cannot be a balloon loan, and it should not have any negative amortization features. At the same time, qualifying for a QM mortgage can be more difficult, as lenders have to follow all of the rules and regulations set forth by the government. This includes verifying bank statements, income, W2s, and numerous other examples of documentation.

A Non-QM Mortgage May Provide More Flexibility

You may want to take a look at Non-QM mortgages because they might offer more flexibility. These are very useful for gig workers that do not qualify for QM loans. Another reason is, you might want to lengthen the loan term to 40 years. Or, you might be interested in a loan that only requires you to pay interest, particularly if you are a real estate investor. This is also an option available to foreign nationals who would like to buy property in the United States. On the other hand, you should talk to a professional who can review the risks of a Non-QM mortgage as well.

Find The Best Loan Option For Your Needs

Ultimately, it is critical to review the benefits and drawbacks of each option before you make a decision. The right loan for one person might not necessarily be the right loan for you. If you talk to an expert, you can review all of the options available and put yourself in the best position possible to qualify for a home loan. 

 

06
Oct
By First Rate Financial Group
Real Estate

Getting Your Mortgage Application Approved As A Self-Employed, First-Time Homebuyer

Getting Your Mortgage Application Approved As A Self-Employed, First-Time HomebuyerA significant number of people are self-employed, which means they might be relying on this income to apply for a mortgage. It is true that people who are self-employed may face additional challenges when trying to get approved for a home loan when compared to someone with traditional W2 income, these are obstacles that can be overcome. With the right qualifications and documentation, even first-time homebuyers who are self-employed should be able to qualify for the home loan they need.

Lenders Assess Someone’s Ability To Repay The Loan

First, lenders are trying to make sure the person will repay the loan. Lenders believe that someone with W2 income has a stable job and a guaranteed salary, which means they are more likely to repay the loan; however, someone who is self-employed has other ways of demonstrating that he or she can repay the loan. Self-employed individuals can use tax returns, payroll receipts, and records from financial institutions that serve as documentation of the applicant’s income or assets. This means standard W2 forms and pay stubs might no longer be necessary.

Navigating Eligibility Requirements

Next, self-employed individuals need to meet the eligibility requirements. This includes two years of self-employment, a reliable income, a strong credit score with a clean credit report, cash for a down payment, and a low debt to income ratio. It is possible for a first-time homebuyer to get a loan for less than five percent down; however, closing costs can be significant. Realistically, first-time homebuyers should plan on spending close to five percent of the home’s value to get approved for a first-time home loan.

Understanding Mortgage Options

Finally, self-employed first-time homebuyers should be aware that there are multiple loan options available. For example, there are FHA and VA loans for those who qualify. USDA loans and jumbo loans might also be an option. There are bank statement mortgages and conventional options available as well. Self-employed individuals might have to visit several of these programs to see which ones work the best. The programs vary in terms of their down payment, minimum credit score, and credit history requirements. It is prudent to work with a professional loan officer who has experience helping self-employed, first-time homebuyers get approved.