Non-QM Loans for Long-Term Real Estate Investing: What You Need to Know
When it comes to real estate investing, there are many financing options available. For long-term real estate investing, non-qualified mortgage (non-QM) loans can be a valuable tool to help investors secure the funding they need. In this blog, we'll explore what non-QM loans are and how they can be used for long-term real estate investing.
What Are Non-QM Loans?
Non-QM loans are a type of mortgage that doesn't meet the guidelines for a "qualified mortgage" established by the Consumer Financial Protection Bureau (CFPB). These guidelines require lenders to verify a borrower's ability to repay the loan and impose limits on certain features, such as interest-only payments or balloon payments. Non-QM loans may not meet these guidelines due to factors such as a borrower's debt-to-income ratio or credit history.
Non-QM loans are considered riskier for lenders, which is why they often come with higher interest rates and fees than traditional loans. However, they can also be a valuable option for borrowers who may not qualify for a traditional mortgage.
How Can Non-QM Loans Be Used for Long-Term Real Estate Investing?
- Purchasing Rental Properties
Non-QM loans can be used to finance the purchase of rental properties. Long-term real estate investors can use these loans to purchase properties that will generate rental income. Non-QM loans may be a good option for investors who have a strong rental history but don't meet the guidelines for a traditional mortgage.
- Refinancing Existing Properties
Non-QM loans can also be used to refinance existing rental properties. Refinancing can be a useful tool for long-term real estate investors who want to reduce their monthly mortgage payments or access equity in their properties. Non-QM loans can provide the capital needed to refinance properties that don't meet the guidelines for a traditional mortgage.
- Portfolio Loans
Portfolio loans are a type of non-QM loan that is designed for long-term real estate investors who own multiple properties. These loans are not based on a borrower's personal income or credit score but rather on the income and value of the investor's entire portfolio. Portfolio loans can be used to consolidate multiple mortgages into a single loan, making it easier for investors to manage their properties and cash flow.
- Cash-Out Refinancing
Cash-out refinancing involves refinancing a property and taking out a portion of its equity in cash. This can be a useful tool for long-term real estate investors who want to access the equity in their properties to fund new investments or make improvements to existing properties. Non-QM loans can be used for cash-out refinancing when the property doesn't meet the guidelines for a traditional mortgage.
Non-QM loans can be a valuable tool for long-term real estate investing. While they may come with higher interest rates and fees, they can provide the capital needed for investors who don't qualify for traditional financing. With careful consideration and a solid investment strategy, non-QM loans can help real estate investors achieve their financial goals. As always, it's important to do your research, work with a trusted lender, and have a plan in place to ensure a successful investment.