Non-Qualified Mortgages after Bankruptcy

In our last post, we talked about Non-Qualified Mortgages (also known as Non-QM Loans).  Non-QM Loans were established after the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A response to the mortgage crisis, the Dodd-Frank legislation created regulations that are implemented by the Consumer Financial Protection Bureau (CFPB). Primarily, these standards create requirements for “Qualified Mortgages”.  Clients that have experienced a bankruptcy may struggle to obtain many types of financing, including a Qualified Mortgage. Ransom Kelly of Assurance Financial is here help to educate Birmingham, Alabama residents about non-qualified mortgages for people that have filed for bankruptcy.

Getting a Non-QM Loan after Bankruptcy

Non-Qualifying Mortgages can be reviewed for borrowers who may have experienced bankruptcy. These types of mortgages even eliminate certain waiting period requirements after a foreclosure, or, a bankruptcy. During the mortgage crisis, many homeowners had to foreclose, go through a short sale, or file for bankruptcy. When seeking a Qualified Mortgage, people affected by these circumstances usually face restrictions and waiting periods.

When you apply for a Non-QM Mortgage after bankruptcy, the requirements to show financial documentation may be less restrictive; however, you will still need to show your ability to repay the loan. You may need to show a consistent history of repayment over the last twelve months. One nice thing about this is that any medical debt or other types of collections may be considered differently for a Non-QM Loan. A reasonable credit score and higher down payment may be required to obtain the Non-QM. As shown in our last blog, you may be asked to have a debt-to-income ratio of around 43%. If you seek approval for interest-only payment periods, interest-only payments may not be granted to you.

Understanding the Non-QM Loan Market

Check out our last blog post for more information on Non-QM loans. We discussed how non-conforming loans are also a type of Non-QM loan. Jumbo Loans, which have high value costs that exceed conforming standards, are primarily Non-QM loans. If you are seeking a Non-QM loan after bankruptcy, use caution if you are seeking a Jumbo Loan, since your ability to repay these costs is under extra scrutiny. Standards considered by Non-QM lenders include:

  • Current employment and income status, as well as debt-to-income ratio;
  • Projected payments for the loan under review;
  • Current income and current assets;
  • Any extra costs for additional loans obtained for the property, property taxes, homeowners

Insurance/association costs; and

  • Credit history, and other debts for auto loans, credit cards, etc.

Ransom Kelly of Assurance Financial is here to help with you about Non-QM Loans after bankruptcy, so call our Birmingham, Alabama offices today. Do not let your bankruptcy keep you from seeing if you can get another mortgage, Ransom Kelly is here to help!