If you feel constrained and capped by the Conventional Fannie Mae/Freddie Mac rules for investment real estate lending, then the Non-QM world (Non-Qualified mortgage) is the place to be.
Our Beverly Hills Mortgage Brokers have outlined below the benefits and drawbacks of Non-QM loans/lenders.
What are Non-Qualified MORTGAGE Lenders/Loans (NON-QUALIFIED)?
Non-QM (non-qualified mortgage) lenders are not bank depository lenders. These are companies that are not subject to traditional Fannie Mae/Freddie Mac regulations. They focus on investors in business real estate who have needs that are beyond the Conventional lending market.
We do not calculate personal in the Non-QM World. DTI (Debt Ratio), or examine personal taxes or personal income. Non-QM loans are available to anyone who is unemployed and has not filed taxes. You can!
Why? Why?
When green-lighting your deal, non-QM lenders will solely focused on these criteria:
1. The property’s ability to generate cash flow in order to pay its debts; or its ability to appraise. ARV If you’re flipping, this will cover the debt.
2-The credit limit of the borrower (660 and higher, preferable 700).
3. Your liquidity (Do you have at least 3-6 months’ worth of liquid assets after closing on the property?
That’s all! That’s it!
8 ADVANTAGES OF NON-QM Lenders/Loans
- Can lend to legal entities (i.e. LLC , Corp etc. ), Family Trusts etc.
- Can consolidate various mortgages into ONE portfolio loan
- No Mortgage Insurance
- Will loan for BOTH Commercial Residential (5+ units), and Commercial Business (retail/office, warehouse, etc.)
- The maximum 5-Loan Amounts are between $45K (residential) and $5M (commercial).
- Don’t need to have a job or income to apply.
- There is no limit to the number of mortgages that you can have
- In some cases, cross collateralization property can be possible
4 DISADVANTAGES OF NON-QM Lenders/Loans
- 20% down payment
- Typically, 2 points fees to the lender or more
- A slightly higher interest rate is available if your credit score is less than 700 or if the property is in foreclosure. DSCR The ratio of debt service coverage is less than 1.3
- Show at least 3-6 months liquidity remaining after closing on the property