Non-QM vs Conventional Loans

Non-QM loans, or non-qualified mortgage loans, are different from conventional mortgage loans in several ways:

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• Underwriting standards: Conventional loans are underwritten according to strict guidelines established by Fannie Mae and Freddie Mac, while non-QM loans are not. This means that non-QM loans may be available to borrowers who don't meet the strict underwriting requirements for conventional loans.

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• Documentation requirements: Conventional loans typically require extensive documentation of a borrower's income, employment, and assets. Non-QM loans may be available to borrowers who have difficulty providing this documentation, such as self-employed borrowers who may not have W-2s or tax returns that accurately reflect their income.

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• Loan terms: Conventional loans generally have standardized loan terms, such as 30-year fixed or 15-year fixed rates. Non-QM loans may offer more flexible loan terms, such as interest-only payments or adjustable-rate mortgages.

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• Interest rates and fees: Because non-QM loans represent a higher risk for lenders, they typically come with higher interest rates and fees than conventional loans.

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• Eligible property types: Conventional loans are generally only available for certain types of properties, such as single-family homes or condos. Non-QM loans may be available for a wider range of property types, such as multi-unit buildings or mixed-use properties.

 

Overall, non-QM loans offer more flexibility and may be a good option for borrowers who don't meet the strict underwriting requirements for conventional loans or who need more flexible loan terms. However, they typically come with higher interest rates and fees, so borrowers should carefully consider their options before choosing a non-QM loan. 

 

To discover what loan options are best for you give our team at NW Alternative Mortgage a call today!