" A qualified mortgage loan is an ' agency ' mortgagebacked security . On the other hand , a No documentation mortgage loan is considered ' nonagency ' or ' privatelabel ' and is suitable for borrowers with exceptional circumstances or those whose incomes differ from month to month ."
You might be a candidate for a NODOC loan , or No documentation mortgage loan if you do not meet the strict Consumer Financial Protection Bureau ' s ( CFPB ) mortgage loan conditions . This type of loan is a NONQM loan and is designed for some rental property investors , borrowers that are selfemployed , and those who do not meet conventional loan standards . Private lenders can also fit selfemployed borrowers into the QM space .
It is also an option for borrowers who have had challenges qualifying for a NO DOC loan due to credit issues ( such as bankruptcy , foreclosures , late payments , or other isolated credit issues ) in the past or have an unconventional source of income .
Unlike the traditional income verification mandated for most loans , this type of mortgage loan allows you to be eligible based on alternative methods . NODOC loans create real estate investment opportunities for a wider array of people due to their more versatile qualification criteria .
A qualified mortgage loan is an “ agency ” mortgagebacked security . On the other hand , a no documentation mortgage loan is considered “ nonagency ” or “ privatelabel ” and is suitable for borrowers with exceptional circumstances or those whose incomes differ from month to month .
Many individuals , including hospitality employees , selfemployed business owners , and retirees , have fluctuating earnings . This is where NODOC loans fill the void by offering dynamic underwriting measures for prudent borrowers with special income conditions .
A prevalent belief is that NODOC loans are " bad loans " in disguise , and therefore not recommended . The reality is that these kinds of loans have their own set of rules related to QM loans to ensure that private money lenders and borrowers are protected from a highrisk loan . The process of lending NODOC and NON QM loans are very similar to that of QM loans , only with a different collection of documents during application .
What is the Difference Between a QM and NONQM Mortgage ?
The biggest difference between a QM ( Qualified Mortgage ) and NONQM mortgage is that a QM mortgage loan tends to be traditional governmentbacked loans and conventional loans .
Because a conventional loan ( QM ) is usually processed through a bank or traditional financial institution on an owner occupied property , a NONQM with a private lender is the best solution for a real estate entrepreneur looking to purchase an investment property .
A NONQM or NONQualified mortgage loan is typically portfolio loans for real estate investors that do not conform to the strict government or conventional mortgage guidelines .
Why Should Borrowers Choose NONQM Loans on their Real Estate Investments ?
Unlike conventional investment property loans that max out at 70 % LTV , a NONQM mortgage program maxes at 85 % LTV and with no PMI with rates starting at 4.375 %. This allows the borrower to put less money down on their purchase . Typically loan amounts range between $ 100,000 and $ 5,000,000 .
NON-QM LOANS
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