Non-Qualified Mortgages for Non-Conforming Loans
Non-conforming loans are a type of loan that exceeds limits set by Government Sponsored Entities (GSEs) such as Fannie Mae and Freddie Mac. Such loans may be used when a borrower wants to obtain a large mortgage. Non-Qualified Mortgages, or “Non-QM” loans, are loans that do not meet requirements set by the Consumer Financial Protection Bureau (CFPB) that regulate loan product features and require lenders to verify certain abilities to repay a mortgage. Ransom Kelly of Assurance Financial is here to help to educate Birmingham, AL residents about non-qualified mortgages and non-conforming loans.
The Difference between Non-Qualified and Qualified Mortgage Loans
Back in 2010, the government passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. This was a response to the mortgage crisis. The Consumer Financial Protection Bureau (CFPB) implemented the rules that established standards for Qualifying Mortgages. The standards primarily focus on a borrower’s capability to repay many types of home mortgages. These include maximum loan terms, caps on fees for loans, and restrictions for other features, such as interest-only loans.
Non-Qualifying Mortgages may be considered for borrowers who may have experienced bankruptcy, a foreclosure, or who are less able to provide detailed documentation of their ability to repay a loan or show the debt-to-income ratio. Some borrowers are self-employed. Certain borrowers may have strong assets or great credit scores, yet they may not wish to wait for the time it takes to receive a qualified mortgage.
Conforming and Nonconforming Loans
A mortgage can be considered a conforming loan or a nonconforming loan. Government-sponsored entities (GSEs) establish loan limits; the conforming loans stay within these limits. These loans are eligible to be purchased by government-backed entities such as Fannie Mae or Freddie Mac. Nonconforming loans are mortgages that exceed the conforming loan limits set forth for Birmingham, Alabama and are not eligible for purchase.
Non-Conforming Loans and the Non-Qualified Mortgage
One type of non-conforming loan is a Jumbo Loan. This type of loan is non-conforming because it exceeds GSE limits. Certain types of non-qualifying mortgages can only be made available if they are within the conforming loan limits. However, lenders may consider Jumbo Loan Non-QMs. Among other factors, a mortgage is considered a qualifying mortgage if the lender verifies that the borrower’s debt-to-income ratio is below 43%. Some consider Non-QM loans for Jumbo Loans, or other non-conforming loans, when the borrower has a debt-to-income ratio above 43%.
Do you want to talk more about Non-QM loans for non-conforming loans? Ransom Kelly of Assurance Financial is an experienced professional that can speak with you about this newly forming market for mortgages. Contact Ransom Kelly of Assurance Financial at our Birmingham, Alabama offices about non-QM Loans today!