A Non-Qualified Mortgage (Non-QM Loan) is a mortgage option for borrowers who don't meet the eligibility requirements for traditional conforming loans offered by Fannie Mae and Freddie Mac. These loans cater to borrowers with unique financial situations that may not be reflected in a standard credit score or income documentation.
Flexible Eligibility:
- Accommodates borrowers with:
- Lower credit scores (can be as low as 620 in some cases).
- Non-traditional income sources (self-employment, commissions, investment income).
- Recent credit blemishes (foreclosure or bankruptcy, with limitations).
- Higher debt-to-income ratios (may be allowed on a case-by-case basis).
Benefits:
- Access to Homeownership: Provides an option for borrowers who may not qualify for traditional loans due to their financial profile.
- Flexibility: Offers more flexibility in income verification and credit history considerations.
Considerations:
- Higher Interest Rates: Be prepared for potentially higher borrowing costs compared to conforming loans.
- Stricter Lender Requirements: Non-QM loans may have stricter underwriting guidelines compared to conforming loans.