Non-QM Loans in Florida — Where to Start and What You Need to Know?
Let’s begin with some background — the housing market has changed significantly in recent years, and borrowers have many new financial scenarios and a desire to obtain flexible mortgage loans. Non-QM Loans in Florida fall under this definition — also called non-qualified mortgage loans, which are significantly different from QM.
A qualified mortgage (QM) loan meets the requirements established by the Consumer Financial Protection Bureau (CFPB) in 2014. We are used to considering a borrower’s salary, credit history, and debt-to-income ratio as the most critical indicators in the loan process. In fact, these are just some of the details that are considered when assessing a borrower’s ability to repay a loan. In addition, there are a large number of borrowers who do not qualify for traditional mortgages. This is where non-QM loans come to the rescue.
If you do not meet the strict criteria for a qualified mortgage, you may want to consider a Non-QM Loan in Florida. This is your chance to increase your flexibility and invest in property in Sunny State. Of course, there are many nuances in this process, which we will talk about later.
How does a non-QM mortgage work in Florida?
A qualified mortgage always meets strict underwriting requirements. In contrast, Non-QM Loans are not subject to these rules and the regulatory restrictions of QM loans, such as specific requirements for the borrower’s income, credit score, and debt-to-income ratio.
This option may be helpful if you have experienced bankruptcy, a short sale, or have a lot of capital and low income. If you recognize yourself in this list, then you may be interested in Non-QM Loan in Florida.
To qualify for this loan, the borrower uses non-traditional income standards — such as the borrower’s assets, employment history, or other similar factors. Of course, the lender perceives the Non-QM Loan as a high risk, so this option requires a high down payment and a high-interest rate.
Benefits of Non-QM Loans
- The main advantage of the Non-QM Loan is a softer and more flexible approach to income and debt-to-income ratio. This option is attractive for people not approved for a conventional mortgage.
- Fast Loan Processing. Non-QM Loans are processed faster, so you can close on the loan and begin occupying the property sooner.
- Custom Loan Options — The flexibility of these loans allows them to be tailored to each client’s financial requirements.
Qualified vs. Non-qualified mortgages
- Underwriting Criteria. Qualified loans require a maximum debt-to-income (DTI) ratio of 43%, proof of the borrower’s income and assets, and prohibitions on loan features, including negative amortization and balloon payments. On the other hand, non-QM loan loans have softer standards. Borrowers with larger DTI ratios and alternative income evidence can apply for them.
- Consumer protection — the CFPB has specific rules that reduce the likelihood of loan defaults and servicing abuses. For example, lenders must know about the borrower’s ability to repay the loan. In contrast, the Homeownership Protection Plan mandates that lenders offer information on avoiding foreclosure. Non-QM loans are not required to follow these rules and may present a higher risk of default and abuse in loan servicing.
- Interest Rates — Qualified loan rates may be cheaper because the lender takes less risk. Non-QM Loan rates are higher due to higher risk.
- Loan options — FHA, VA, and USDA loans are just a few loan programs that may be available to QM borrowers. Non-QM Loans may require a more specific type of borrower to meet specific criteria. Such as a stated income loan, an asset-based loan, or an interest-only loan.
Requirements for Non-QM Loans in Florida
Of course, each lender has its requirements, so you must compare loan offers and clarify the details carefully. However, there is a basic list of requirements for Non-QM Loans that you need to be aware of.
- Credit Score — You need a score between 620 and 680 for qualified loans. Lenders with Non-QM Loans consider borrowers with low credit scores and review each application separately.
- Income documentation — Non-QM Loans use alternative methods of income verification. For example, bank statements or asset depletion, instead of traditional pay stubs and W-2s. As a result, it helps self-employed borrowers or borrowers with non-traditional incomes obtain a loan.
- Debt-to-income (DTI) ratio — Non-QM Loans offer higher ratios than qualified loans, where the minimum DTI ratio is 43%.
- Loan-to-value (LTV) ratio — Non-QM Loans have higher rates LTV ratios than qualified mortgages. So, borrowers can finance a higher percentage of the home’s value.
- If you want to buy property in the Sunshine State and the only what’s stopping you from purchasing is qualifying, then consider Non-QM Loans in Florida. In addition, you will be able to receive support and assistance from a team of LBC Mortgage experts who specialize in the local market and practice an individual approach for each client.
Even unique financial circumstances or a low credit score will not hinder obtaining mortgage financing. Sign up for a free consultation to assess your mortgage prospects and find a program that suits your needs.
We are sure that there are no circumstances that can stop you from buying real estate. The main thing is to find the right option and make your dream come true!