Conventional rates are on the rise yet again, forcing brokers, lenders, and originators across the industry to expand their portfolio. The problem is there are still so many mortgage professionals who don’t trust non-QM loans because they associate them with the 2008 subprime crisis. But these aren’t the same predatory loans your fathers bought in 2006 with no income or assets to back them up. With the establishment of the CFPB and several new committees to monitor the mortgage market, today’s non-QM loans are much more secure and actually perform well.
One non-QM lender, A&D Mortgage, maintains that non-QM borrowers are no different than conventional borrowers, and in most cases, are identical in their ability to repay and put down 20%. The main difference is that these borrowers are looking for loans higher than the conforming limits.
There is no better time than now for mortgage professionals to educate themselves on non-QM loans. The pandemic has affected many borrowers’ ability to qualify for conventional loans, but non-QM programs can alleviate that stress, especially for small businesses and self-employed or gig economy workers. A&D Mortgage, for example, offers a wide range of programs, including DSCR, 12- and 24-month bank statements, 1- and 2-year P&Ls — all designed to help borrowers save money while refinancing or buying a home to live or invest in.
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If that can’t convince you to open your mind and portfolio to new options, then perhaps these facts will: Up to 65 million workers have filed for unemployment since the start of COVID-19, and about half of those people are employed again. Those people are non-QM borrowers. More than 2 million are in forbearance and another million were already in some stage of default prior to the pandemic. Those people are non-QM borrowers. There are about 30 million self-employed borrowers that comprise the gig economy in the U.S. They are all non-QM borrowers.
People who had income disruptions that happened between 13 to 24 month, a 12-month bank statement that shows consistent and steady income for the past year could get them a loan. In addition to this type of loan, any pre-pandemic employment or income gaps that occurred 2 years ago become irrelevant. If your borrower saved money during the pandemic, they can acquire an investment property with a DSCR loan, which requires no income documentation whatsoever. Lastly, if your borrower is coming out of a forbearance plan, they only need to show 3 consecutive payments to qualify for a loan. These are a few non-QM options A&D Mortgage offers to borrowers.
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“The bottom line is that you will need to work with a trusted lender accustomed to handling these unconventional situations,” a press release from A&D Mortgage states,”— credit issues, irregular income streams with extra documentation requirements — with speed, flexibility, and a solid understanding of available Non-QM options.”
