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In a market where more and more home buyers are finding it difficult to obtain a mortgage through traditional channels, non-QM lending has become a viable solution for many.
In a market where more and more home buyers are finding it difficult to obtain a mortgage through traditional channels, non-QM lending has become a viable solution for many. Non-QM loans are mortgages that do not conform to the Qualified Mortgage (QM) rules set by the Consumer Financial Protection Bureau (CFPB). This means that they offer more flexibility in terms of credit score and debt-to-income ratio requirements, making them ideal for borrowers who may have been turned down for a mortgage in the past. In this blog post, we will discuss the benefits of non-QM lending for real estate agents and their clients.
One of the main benefits of non-QM lending is that it can help real estate agents close more deals. This is because non-QM loans are available to borrowers who may not qualify for a traditional mortgage. This includes self-employed workers, business owners, investors, gig workers, and so on. So, if you have a client who doesn't quite fit the mold of a "traditional" borrower, a non-QM loan may be the perfect solution. Non-QM loans can also be helpful for borrowers who have a lower credit score or higher debt-to-income ratio, or can't prove income in the manner required by conventional loan lenders. This is because non-QM lenders typically have more flexible credit score and DTI requirements than traditional lenders. As a result, more borrowers will be able to qualify for a non-QM loan.
No, non-QM loans are not the same as subprime loans. Subprime loans are typically offered to borrowers with bad credit who would not be able to qualify for a traditional mortgage. Non-QM loans, on the other hand, are offered to borrowers who may not fit the mold of a "traditional" borrower, but who still have the ability to repay their loan. Subprime loans were often associated with predatory lending practices, whereas non-QM loans are not. Following the 2008 crash, non-QM lending all but disappeared, but it has been making a comeback in recent years bolstered by new consumer protections and business practices that have sharply distinguished it from the subprime loans of the past.
By having connections in the Non-QM space you can open the door to a larger pool of buyers - including those who are self-employed, business owners, investors, gig workers, foreign nationals, etc. You can also facilitate more types of transactions like cash-out refinances, investment property purchases, landlord loans, build + equipment, and more.
Non-QM loans can offer borrowers better rates and terms than traditional mortgages, as well as provide more flexible guidelines. This is because Non-QM loans are not bound by the same rules and regulations as Qualified Mortgages. Some examples of better loan terms include no maximum loan limits, no Private Mortgage Insurance requirements, and longer loan terms.
According to a recent article in Mortgage Professional America, origination volume for non-QM loans is expected to grow significantly in 2022. Estimated loan origination volume has risen from $50 billion in 2018 to an estimated $85-$95 billion this year. This is due to the increasing popularity of non-QM loans as borrowers who don't fit the traditional mold seek out financing options that better suit their needs.
As a real estate agent, it's important to have connections with non-QM mortgage brokers and lenders in your area. In this still burgeoning space, you can get ahead of the curve by building strong relationships with brokers in your area that are specializing in this industry. You can build these connections by attending expos or simply conducting an online search to identify opportunities to network. his will allow you to better serve your clients who may not qualify for a traditional mortgage and ultimately close more deals.
