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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.

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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.