These five loan types are for situations where a regular loan won’t cut it.
What are non-QM loans? Non-QM loans are literally non-qualifying mortgages. These are mortgages that do not fit the guidelines or what we would consider to be a conventional mortgage or a government-backed loan. And there are several different types. With those different types, you have bank statement loans, DSCRs, or debt service coverage ratio loans. You also have non-tax I.D. loans. Adjustable rate mortgages, I know they have a bad rap, but we’ll briefly talk about those and then foreign national loans. Now, remember that these mortgages are for people who ordinarily do not fit the mold for a government loan. That’s either Fannie Mae or Freddie Mac, which we would call conventional guidelines. FHA, or VA. So these loans are not necessarily in the high-interest rate category, but they’re in that in-between.
For example, bank statement loans are mainly made for business owners. We all know a lot of times that, business owners when they do that tax returns, a lot of times you write off a lot of their debts. And so what ends up happening is that the lender is typically going to look at your adjusted gross income. That adjusted gross income is what lending uses, or the government, to determine whether or not you’re going to qualify for a mortgage. If you have, let’s say, $100,000 in income but you’ve written off up to $80,000, that shows only $20,000 in income. A lot of times, for a lot of buyers, we can’t help them in that situation.
We also have the debt service coverage ratio loan. So with those types of loans, what happens is the lender will look at the debt service of the particular property, i.e., whether or not the property can carry itself to rent. So, for example, if your mortgage would ordinarily be $3,000 a month, the rentals in the neighborhood need to be at least $3,000 a month in order for you to get this loan.
“These are mortgages that do not fit the guidelines.”
So the lenders in those two types of loans are looking more at your assets, meaning whatever money you have in your account or you deposit in your bank account in the case of the bank statement loans, to determine if you can qualify. We have non-tax ID loans. These are a lot of times for dreamers. And I know you guys typically have dreamers, or people that have gotten political asylum to the United States, and they may not have a Social Security Number or a tax ID, so a lot of times, even those people can get a mortgage. I’ve actually done a mortgage with a client that had that same situation. You have the American Dream as well, not just anybody that has been born or raised here.
Adjustable rate mortgages are another. They have bad reputations. Now, adjustable-rate mortgages could actually work very well for this market. Right now, we’re seeing higher interest rates. And so, with adjustable rate mortgages, they typically have a great introductory rate anywhere between 2% to 4% less than the market rate. Just keep in mind that the market will adjust the rate. So you have to hedge against that, and you can oftentimes refinance out of an adjustable-rate mortgage.
We also have foreign national loans with foreign national lending. This is particularly for buyers coming from outside the United States and not residents of the United States. We can get financing for those people as well.
So keep in mind we have alternative means of financing in order to get you lending. Just because you don’t fit the necessary, general mold of the average buyer doesn’t mean that you can’t purchase a home with financing. So give me a call. Let me know if you have any questions.
