If you have been looking for a mortgage in the last few years or run into problems qualifying for a home loan because of your unique situation, you’ve probably heard a lot more about Non-Qualified Mortgages (non-QM).
Non-QM loans are offered by specialty mortgage lenders like Newfi Lending.
Non-QM loans offer alternative qualifying requirements when compared to traditional Qualified Mortgage (QM) loans. Because QM loans are backed by entities like Fannie Mae and Freddie Mac, they are required to follow the guidelines set by the Consumer Financial Protection Bureau (CFPB).
These guidelines do not offer the same flexibility as non-QM loans, leaving some borrowers—like self-employed workers—unable to qualify for a mortgage.
Non-QM mortgage loans are backed by other investors are not required to follow the QM guidelines. Non-QM lenders, like Newfi, have more flexibility and often offer mortgage solutions with expanded guidelines regarding debt-to-income (DTI) ratio, down payment, and income documentation requirements.
With a rise in self-employed workers and a fast-moving housing market, many private mortgage lenders are now providing non-QM loan options to meet the demands of an ever-changing market.
While many lenders have only just started offering non-QM mortgages, Newfi has been committed to creating innovative and unique non-QM options for years and specializes in these solutions.
Newfi is a Non-QM lender of choice for many borrowers. We’ve grown to be a nation-wide mortgage lender with a variety of QM and Non-QM home loan solutions. In 2022, we were even named one of Inc.’s Fastest Growing companies.
What Non-QM Borrowers Can Newfi Help?
- Real Estate Investors
Many real estate investors prefer non-QM investment property loans, like DSCR Loans, to finance their rental properties because these loans offer more flexibility compared to QM options.
At Newfi, our Debt Service Coverage Ratio (DSCR) Loans help real estate investors purchase or refinance their investment properties and maximize their monthly cash flow.
A DSCR loan qualifies the borrower on the expected rental income of an investment property and doesn’t have any income or debt requirements. Our DSCR loans also offer benefits like quicker closings, less required documentation, unlimited properties, and longer loan terms like 40-year mortgages.
- Self-Employed Individuals, Gig Workers, and Small Business Owners
Many self-employed workers take advantage of tax benefits, which makes their annual income look much lower than they actually make on their tax returns. Because of this, many self-employed borrowers have documentation that does not accurately reflect their income.
Self-Employed Mortgages—including Bank Statement loans—are non-QM loan options borrowers qualify for using alternative income documentation and do not require W-2 or Tax Returns.
Newfi’s Self-Employed Mortgage Requirements:
- 12 to 24 Months of Flexible Income Documentation
- Business/Personal Bank Statements
- 1099 income
- CPA letter
- W2 income
- A Combination of any of the above documents
- 1-2 Years of Self-Employment History
- Credit Scores as Low as 640
- Multiple Loan Term Options are Available
- 30- and 40-Year Fixed
- 30- and 40- Year Interest Only
- Graduated Payment Mortgage Options
- 2-1 Buydown Option
- First Time Homebuyers Can Qualify
- Borrowers with a High Number of Assets
For borrowers with their income tied up in the stock market, non-QM loans offer a way to qualify for a mortgage using your assets, sometimes referred to as asset depletion loans.
Non-QM lenders often offer borrowers the option to qualify for a mortgage using assets as income. This helps borrowers leverage their net worth to qualify for a mortgage without having to liquidate their assets. At Newfi we establish a borrower’s monthly income by dividing the total value of assets by 84 months and use that as the income documentation you need to qualify. Restrictions apply based on asset type.
- Borrowers Looking for Lower Monthly Payments
Some non-QM loan options have longer or unique loan terms. These loan options can offer borrowers things like lower their monthly payments compared to traditional 30-year fixed rate loan terms. This helps borrowers lower their monthly mortgage costs.
Newfi offers several of unique non-QM loan solutions that can help you save.
40-Year Mortgages from Newfi provides borrowers the option to pay off their mortgage over 40 years, instead of the traditional 15 or 30 years. With a 40-Year Interest Only (IO) Mortgage, borrowers pay only the interest, instead of the interest and principal, for first 10 years of the loan. After the IO period ends, the loan effectively turns into a 30-Year Fixed Rate mortgage. We also offer 40-Year Fixed Rate mortgages.
Our Graduated Payment Mortgages are non-QM loans with fixed interest rates and 30-year loan terms. This non-QM loan option offers borrowers lower monthly payments that gradually increase during the first 5 years of the mortgage, referred to as a graduation period. During the graduation period, your mortgage payments increase (graduate) by 5% each year. At the start of year 6, the mortgage payments level out and remain the same for the rest of the loan term.
What are the Benefits of a Non-QM Loan?
- Expanded Qualifying Guidelines
Because non-QM lenders can set their own qualifying standards, more borrowers are able to find mortgage options that works for their unique situation.
- More Loan Term Options
Non-QM lenders can offer mortgage solutions with unique features like, longer loan terms or lower monthly payment options. These alternatives allow borrowers to find financing for their home.
- Faster Closings
Some non-QM loans (like DSCR Loans) require less documentation to qualify. Less documentation means you’re able to close on your mortgage faster.
- Larger Loan Amounts Available
Conforming loan limits on QM loans can make it impossible for borrowers looking to buy houses with larger price tags. To combat this, non-QM lenders offer Jumbo loans, which are non-QM loans that have higher loan limits. At Newfi we lend up to $4M on our Non-QM solutions.
- Alternative Income Documentation Requirements
Non-QM loan options like Self-Employed Mortgages and DSCR Cash Flow Loans offer borrowers the ability to qualify for a mortgage without submitting W-2 or tax return income documentation.
What are Non-QM loan rates?
Because Non-QM loans are unique solutions, interest rates for these mortgages are higher than a standard QM mortgage. Your mortgage rate will also depend on other factors like down payment, credit score, and more.
Non-QM Loans and Newfi Lending
Non-QM loans help many people across the country find mortgage financing. Newfi was founded by industry leaders with the commitment to help more Americans find mortgages that work for them. Which is why for nearly a decade, we’ve helped over 3,000 families finance their futures. Are you ready to start your mortgage journey? Click here to get started!