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Self Employed and Want to Purchase a Home? Self Employed Non-QM Might Be the Right Type of Home Loan For You.
In our recent blog about the differences between a 15 year and 30-year fixed-rate mortgage, we covered some of the demanding criteria required to qualify for and purchase a home. While most home buyers go that traditional route, we recognize it’s not the right path for everyone. If you don’t think you have the ability to meet a lender’s standard mortgage criteria and need an alternative option, then keep reading to learn more about
non-QM loans and whether or not they’re the right types of mortgages for you.
A non-QM is a type of mortgage loan that can aid buyers who don’t or can’t meet the complex requirements associated with credit score, debt-to-income ratio (or DTI), proof of income (pay stubs, etc.), and other financial metrics. Applicants interested in non-QM loans aren’t necessarily struggling financially — in fact, it is sometimes totally not the case.
In many situations, non-QM loan applicants are just self-employed, so they can’t produce pay stubs or accurate tax returns from an employer as other applicants can. Some self employed borrowers will have a great year on the books one year, then the following year have a terrible looking return. So, if you’re self-employed and want to submit an alternative to tax returns for a mortgage approval, you can provide your lender with bank statements and qualify for a bank statement loan.
Before you consider a non-QM loan, you should firmly understand the pros and cons of choosing this route for purchasing a home in the
CO, CA, and NV markets.
| Pros | Cons |
|---|---|
| The application process is relatively similar to that of a standard fixed-rate mortgage, so it doesn’t require too much additional work, time, or resources to apply. | While the process itself is just as easy, it can be more costly due to increased fees and other unforeseen expenses. |
| Lenders have lower requirements for income documentation and verification. You may not be required to submit pay stubs, W-2s, or other standard fixed-rate application documents. | Because lenders have less income documentation to base their approval on, you will pay higher interest rates to own your home. |
| Enables self-employed and/or applicants with lower credit scores to qualify for a loan. | It may be challenging to find lenders in your area that offer Self Employed non-QM because they can be riskier to the financial institution financing the loan. |
Not sure which mortgage loan type is right for you? Check out our blog for other articles just like this, or
schedule a consultation with Maggie and the Greenfront team to get started on your home buying or refinancing journey.
