For borrowers that couldn’t meet the guidelines for Qualified Loans, many look out for other options to get financing to buy a home. That’s where non-qualified loans come into the picture.
These home loans are perfect for borrowers that have unique situations. And in order to fully understand the ins and outs of this mortgage program, it’s good to know the basics and who exactly fits the mold for it.
Qualified Loans vs Non-qualified loans
Qualified loans are your standard/traditional loans. They are stable and more structured. Borrowers go through a very crucial and thorough process before the mortgage gets approved.
Lenders have specific requirements and qualifications to look into before they decide that you are reliable enough to have a mortgage.
Through credit scores, DTI ratios, and other financial documents, they would know if you have enough income to be able to pay your monthly mortgage payment throughout the term of the loan.
Basically, anything that does not cover the standard qualifications for a qualified mortgage is considered non-qualified. It gives borrowers another chance to become homeowners despite their status.
Sure, there’s still a set of guidelines and qualifications to be able to score non-qualified loans but unlike qualified mortgages, the rules are much more flexible.Know more about Non-QMs today.
Who can qualify for a non-qualified loan?
Individuals who almost qualified for a qualified loan
Sometimes borrowers get so close to getting a mortgage and becoming homeowners but along the way, something tips that scale and they end up back to the very beginning.
For those who almost qualified for a standard/traditional home loan, qualifying for non-qualified loans is a very good second option.
Self-employment has its perks but in the case of applying for a mortgage, being self-employed could sometime be the reasons that hinder you from it.
But thanks to different non-qualified loans offered in the market, self-employed individuals now have another option to qualify for a mortgage.
People who have low credit scores due to a financial downfall
If you’re a borrower that went through a foreclosure, a bankruptcy or a mortgage delinquency, you can try your luck buying a home through applying for a non-qualified loan.
It opens up an opportunity for a second chance for these individuals to become homeowners despite their downfalls. Now that their getting back on their feet, knowing that mortgages like this exist would give them more motivation.
How will borrowers qualify for a loan?
There are a few important things the lenders will look into if you want to finance through non-qualified loans.
In order to be able to earn that big yes from your trusted lender, you need to be ready for what information they would want to see from you.
Income and assets are very standard. Even if you’re trying to get approved for a non-qualified loan, lenders would still want to see if you have the ability to repay the mortgage once it rolls out.
They would also look into your employment status and request documentation to prove your credentials.
Credit scores and debt-to-income ratio requirements are more relaxed for non-qualified loans but most lenders would still look into it. In order to get better loan terms, it helps to aim for good credentials.You can also ask out lenders about how to qualify.