Great question! QM stands for a qualified mortgage. 

Qualified mortgages tend to be traditional government-backed loans and conventional loans (FHA, Fannie Mae, Freddie Mac).

QM Loans are usually processed through a bank on an owner-occupied property whereas NON-QM Loans are a more desirable solution for real estate investors on an investment property.

NON-QM stands for a NON-qualified Mortgage. Non-QM loans are typically loans for private investors that do not conform to the strict government or conventional mortgage guidelines.

Should Real Estate Investors choose NON-QM Loans Over Traditional or Conventional Loans?

Mortgage lenders who utilize QM loans must first qualify a mortgage borrower’s income, liabilities, and monthly debt payments to determine whether the borrower can successfully pay back the loan in the future. To successfully qualify for a QM loan, real estate investors must fit the strict requirements set by the Consumer Financial Protection Bureau. This approval process requires borrowers to submit extensive documentation concerning their credit history, income, assets, and monthly debt payments, which usually takes well over a month to complete.

If you have an investment property that needs a quick turnaround without stringent guidelines, NON-QM loans may be better for you. NON-QM loans do not need to abide by these strict guidelines. This means that NON-QM lenders can provide faster service and approval to more types of real estate investment opportunities.

NON-QM lenders understand that life can happen and that to a traditional lender (like a bank) certain real investors may not present like a qualified candidate for a loan. This restriction could be due to your employment status, income, credit history, and liquid asset requirements. However, with a non-qualified mortgage, private lenders focus on; high credit score, investing experience, and liquid assets.

Unlike conventional investment property loans that max out at 70% LTV, a NON-QM Mortgage Program maxes at 85% LTV and with no PMI. This allows the borrower to put less money down on their purchase.

As a result, NON-QM loans’ lax restrictions make them ideal for these types of real estate investors:

Self-Employed Investors: Especially considering the unprecedented year, with COVID-19, NON-QM lenders completely understand how difficult it is to find steady income. They specialize in NON-QM Loans and asset-based loans. This means that you do not need to show your income! They base loans on the value of the property itself or the borrower’s credit score and liquid assets.

Foreign Nationals: Government-backed loans typically require proof of a US Social Security number or a W2 (which is a US tax form). Because NON-QM loans don’t have such requirements, they are ideal for foreign nationals who are in the States on a visa and are looking to invest.

Why Should Real Estate Investors Work with a Non-QM Lender?

Non-QM lenders are hard money lenders for real estate investors in the United States. They understand how important your time is, as opposed to banks who broker your loan application out to other banks or waste time. Most Non-QM lenders can get back to you with your pre-approval for a loan within 48 hours.

Most Non-QM lenders work directly with real estate investors and help them fulfill their real estate entrepreneurial goals. Whether you’re an experienced borrower or a first-time investor, they understand how daunting and complicated it must be to try to enter this competitive field.

If you need help with finding financing, or any of the financing options mentioned in this article, contact your Anderson Funding Community funding specialist.

We will conduct a free one on one funding consultation. We will determine what lender would be best for your funding request. We will contact that lender on your behalf. If they indicate they can fund you, we will introduce you. This way, you are only speaking with lenders that are familiar with your funding request and already indicated they can fund you.

Make you appointment here:
https://calendly.com/integrityfundingconsultants