The Pros and Cons of Non-QM Mortgages

Nontraditional Mortgages
Because of the flexible terms, Non-QM loans are great options if you can't qualify for a traditional home loans. In this article, we will outline the benefits and drawbacks of non-conventional mortgages so you can be comfortable with your decision.
Published on
August 18, 2023
Copy link

If you want to buy a home but don't qualify for a traditional loan, non-QM loans may be right for you. With these loans, the lender isn't required to verify your income, credit scores, or your debt to income ratio. Instead, they're more interested in where you plan to use the money and what type of property it will finance. For example, Non-QM loans are often used by real estate investors. Lenders will verify that you qualify for a Non-QM loan by checking your bank statements, tax return and your unconventional income. Non-QM mortgage products are no backed by government programs like Freddie Mac or Fannie Mae.

This means that non-QM loans can be used for a wide range of purposes: home purchases; refinances; construction financing; refinancing an existing mortgage; vacation homes and second homes; investment properties; businesses that require equipment or machinery purchase or lease (e.g., manufacturing plants).

Pros of Non-QM Mortgages
  • You can own multiple properties with out it being used against you.
  • Loans for people who have high debt.
  • Loans for people who have low credit.
  • Less documentation is required for non-QM mortgages than for traditional loan products.
Cons of Non-QM Mortgages
  • Higher interest rate
  • Higher closing costs
  • Alternative repayment leaves more room for defaulting on your loan. You could end up paying an additional amount in penalties if you are unable to repay the loan according to its terms.
  • Non-QM lenders and products can be harder to find

In conclusion, Non-QM mortgages are a great option for those who can’t qualify for a traditional home loan or need more flexibility in their loan terms. However, it's important to do your research and understand all of the pros and cons before you jump into one of these types of loans!

Get started today
Whether you're actively looking, or just researching, you can find out what you qualify for and get connected with a pro.
Apply Now
Explore the World of Nontraditional Mortgages
Discover nontraditional mortgages that could work for you! Fill out the form below, and one of our experienced loan officers will get in touch to discuss the best mortgage solutions tailored to your needs.
Learn More
Latest posts

Don't Stop Here

Check out some of these related articles.

Unpacking Non-QM Mortgages: A Guide for Self-Employed Borrowers

Self-employed borrowers can use these loans to provide flexibility in documenting income, and benefit from unique loan features that cater to their needs. With the help of experienced mortgage professionals, these loans can offer a lifeline to those seeking to achieve their homeownership goals.
Read post

How to get a Home Loan When you are Self Employed

Get ready to celebrate! It is easier then ever for lenders to use other types of evidence to verify your income when you apply for a home loan.
Read post

The Home Loan Application Process

The home loan application process from start to finish. Follow along with our step-by-step guide to get your mortgage approval faster and easier than ever.
Read post