Non-QM Loans

For the most up-to-date non-QM loan rates, check our current mortgage rates page. Non-QM loan rates vary based on several factors, including the specific loan type, your credit score and financial profile, down payment amount, and current housing market conditions.

Non-QM mortgage products may be more expensive than other types of home loans. Since they’re not backed by Fannie Mae or Freddie Mac and can’t be sold on the secondary mortgage market, they’re riskier investments for non-qualified mortgage lenders.

To mitigate this risk, lenders typically require higher minimum down payment amounts and interest rates that can make some non-QM loans more expensive than traditional home loans.

However, this isn’t always the case. Some non-QM products, such as DSCR loans for real estate investors, can actually offer lower interest rates than conventional investment property loans. This is due in large part to the Loan-Level Price Adjustments (LLPAs) applied to conventional financing. 

Because of their more flexible lending criteria and, in some cases, competitive pricing, non-QM loans may still be a more attractive alternative for self-employed first-time buyers, repeat buyers, real estate investors, and others who don’t fit with traditional lending guidelines.

Both fixed-rate and adjustable-rate options are available. Fixed-rate loans provide payment stability and predictability, while adjustable-rate mortgages may offer lower initial rates that can be beneficial for certain investment strategies or shorter-term ownership plans. 

If you currently have a non-QM loan and want to explore better terms, you can refinance a non-QM loan to potentially secure more favorable rates or terms.

Private mortgage insurance (PMI) is only required for conventional mortgages backed by Fannie Mae and Freddie Mac. Instead, for non-QM loans, your lender will have their own requirements in place to help them reduce their risk when borrowers make low down payments.

Credit score requirements depend on the loan type and loan amount, but can be as low as 620 in some cases, making non-QM loans accessible to borrowers with less-than-perfect credit.

Non-QM loans don’t require traditional underwriting requirements like W-2s and pay stubs to verify your income. While there’s no longer a no-doc mortgage program available for homeowners, non-QM loans are relatively low-doc.

A few basic types of documentation you may need to get approved for a home loan include the following:

• Bank statements: Bank statements are crucial documents for non-QM mortgage loans because they help underwriters verify your income and determine whether you have the ability to repay the loan. Lenders may ask for these documents with conventional loans as well, but they’re most important for non-QM loans like bank statement loans and asset-based loans.
• Rental agreement: Rental agreements for DSCR non-QM loans verify the gross rental income you are receiving. If you do not have a rental agreement, the appraiser will provide a monthly rental income based on rental comparables in the area on form 1007.
• Proof of assets: Asset-based loans allow you to use liquid assets as income to qualify for a mortgage loan, so you’ll need to provide proof of those assets, including retirement, investment, and bank accounts.

The exact type of documentation you’ll need depends on the loan. For instance, one of the key differences between DSCR vs. conventional loans is the type of documentation required to determine a borrower’s ability to repay. DSCR loans are for investment properties and determine whether the rental income can cover the total cost of the mortgage, so there’s no income verification, but you’ll have to provide information regarding the rental income of a particular property.

Yes, Griffin Funding offers recent credit event loans, and many non-QM loan types have flexible qualification guidelines that can accommodate those who have experienced significant financial setbacks like bankruptcy or foreclosure. 

These programs are designed to help you rebuild your homeownership dreams even after major credit events, often with shorter waiting periods than conventional loans require.

Non-QM mortgage payments are calculated the exact same way as regular mortgages. The only difference is the underwriting process which determines a borrower’s ability to repay using alternative documentation like bank statements instead of pay stubs.

Like all home loans, non-QM mortgage payments are calculated based on principal, interest, taxes, and insurance (PITI).

• Principal: The principal is the amount of the payment that’s dedicated to repaying the principal balance.
• Interest: Interest is the mortgage rate you receive when you apply for the loan. Bad credit can result in higher interest rates, which typically results in higher monthly payments and a greater cost over the life of the loan.
• Taxes: Taxes refer to real estate and property taxes assessed by local government agencies. They’re calculated each year and can be paid as part of your mortgage.
• Insurance: Property insurance payments are rolled into your mortgage payment. Non-QM loans do not require PMI.

Qualified mortgages are defined as conventional loans backed by Fannie Mae and Freddie Mac, as well as government-backed loans such as VA loans, FHA loans, and USDA loans. The CFPB has established a set of rules for QM loans to provide more stable borrowing requirements. 

Some of the key qualified mortgage requirements include:

• The “ability-to-repay” rule: Under the ability-to-repay rule, lenders must make a good-faith and reasonable effort to determine whether a borrower can afford to repay the loan. More specifically, this means a lender must inquire about and document a borrower’s income, assets, employment status, credit score, and monthly debts and expenses.
• Certain loan features are prohibited: No negative amortization, interest-only, or balloon loans are permitted.
• Limits on loan price and term: In order to be a qualified mortgage, a loan must not exceed an APR threshold that varies depending on the type and size of the loan. Additionally, the loan term cannot exceed 30 years.
• Limits on points and fees: The points and fees for a qualified mortgage exceeding $100,000 must end up being 3% or less of the total loan amount. The threshold for points and fees varies for smaller loan amounts.

These stricter regulations were established in 2014 in response to the Great Recession that lasted from 2007 to 2009, during which many borrowers defaulted on their subprime mortgages and were forced into foreclosure. This not only had a long-lasting effect on the economy, but damaged many individuals’ credit.

Hard money loans are designed for investment properties, while non-QM loans are for residential and investment properties. Hard money loans typically require higher down payments than many types of non-QM loans and tend to have exceptionally short loan terms and higher rates and fees.

You can purchase a residential or investment property with non-QM loans, including:

• Primary and secondary residences
• Vacation homes
• Investment properties
• Single-family homes
• Multi-family homes
• Townhomes & condos
• Manufactured homes
• Rural homes

Note that eligible properties may vary depending on the type of non-QM loan you use. For example, DSCR loans can only be used to purchase income-generating properties and cannot be used to buy a primary residence.

Some of the cons of non-QM loans include: 

• Less safeguards in place for borrowers
• Potential for higher interest rates
• Higher down payment requirements 
• Not offered by every lender 

Griffin Funding aims to complete the mortgage process in 30 days or less, providing efficient service while maintaining thorough underwriting standards. Our AI-driven underwriting platform helps streamline the process so that we can deliver funding within a shorter timeline.

The process for securing a non-QM mortgage is fairly straightforward and can be completed in 10 easy steps:

1. First, the loan officer will assess your situation and propose the loan options (and the rates) that are available for your circumstances.
2. Complete the loan application over the phone or through our secure online platform.
3. Lock in your rate over the phone based on the agreed-upon terms.
4. We will send the initial application and disclosures which you will need to then review and e-sign.
5. Return the requested supporting documentation.
6. Your paperwork will be submitted to underwriting.
7. The appraisal of the property and a termite inspection (if applicable) need to be performed.
8. Once the loan is approved, we will request any additional information to finalize the documentation.
9. You will review your Closing Disclosure/settlement statement with your loan officer and then you can have it signed by a notary.
10. Once everything is complete, your loan will be funded and you’re ready to move forward with purchasing or refinancing your property.