During the interest-only period, the principal will remain unaffected. Interest Only LoansĪn interest-only loan means the borrower pays only interest for a set period or the duration of the loan. Assets could include:Īsset-based loans are designed for those who have substantial cash but can’t otherwise qualify for a loan. Asset-Based LoansĪsset-based loans allow you to leverage your assets, such as real estate and investment accounts, to be approved for a home loan. QM loans require extensive financial documentation such as W-2s, pay stubs, tax returns, etc.īank statement loans are great for business owners and self-employed professionals who may have enough income to qualify but don’t have the documentation to prove it. hash-mark Examples of Non-QM Loans Bank Statement Loansīank statement loans only require a bank statement for approval. But they can also be risky because they don’t have to adhere to the usual standards recommended by the federal government to protect lenders. Non-QM loans can be an alternative for those who would otherwise not qualify for a loan. But a non-QMI loan may also have terms deemed too risky for the GSEs, such as negative amortization or balloon payments. Non-QM loans don’t meet the standards to be classified as QM loans, usually because the borrower can’t verify their income, they have a low credit score, or they have high debt.
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Following the 2008 Housing Crisis, the Dodd-Frank Bill created what is known as a qualified mortgage (QM) which set the parameters for what the GSEs could and could not insure. Usually, a borrower will get a non-QM loan because they do not meet a traditional loan’s credit and income requirements. Non-QM loans are mortgage loans that are not backed by a department of the federal government or by the government-sponsored entities Fannie Mae and Freddie Mac. Here is a look at non-QM loans and who they benefit.
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Non-QM loans offer laxer requirements but may feature higher interest rates and desirable terms than conventional mortgages. If you don’t meet the qualifications of a traditional mortgage, there is something called a non-QM Loan that you may consider.