How Do Non-QM Loans Work in California?

Buying a home is part of the American dream, but as you start your home buying adventure you wonder how you will finance your home purchase? If you have a stable job with W2s, you’ll have an easier time applying for a conventional loan.

On the other hand, if you’re a gig worker, self-employed, a contractor, or a freelancer for various projects, you’ll need to go through a different process of income verification.

Most traditional home loan lenders only accept proof of regular paychecks from an employer which is close to impossible to provide if you are not regularly employed.

This is why self-employed borrowers look to Non-QM loans as an alternative to mainstream mortgages. 

If you are among the self-employed workers mentioned above, you can learn more about non-qm loans from an experienced mortgage advisor in Woodland Hills, CA.

Let’s take a look at how non-qm loans work and the things you should know before you apply for one.

What are non-qm loans?

A non-qm loan is a type of home loan that doesn’t meet the standards of a qualified mortgage. These loans are designed for borrowers who are self-employed, have non-traditional income, have assets but no income, or those who don’t qualify for a traditional loan.

With a non-qm loan, lenders use non-traditional methods of income verification to help borrowers get approved for a loan. These loans usually have much lower eligibility requirements when it comes to credit scores, DTI, and loan amounts. You can also find lenders who won’t require you to pay a high 20% down payment. 

Are you interested in a non-qm loan? Get in touch with us to learn if you qualify for a non-qm loan.

You have a bigger chance to qualify for a non-qm loan even with lower credit scores

As long as you can prove that you have easy access to funds and make timely payments you have a good chance of getting loan approval. Lenders who offer non-qm loans are more focused on proof of steady income so that you can make your monthly mortgage payments rather than credit scores.

This doesn’t mean that lenders won’t require a minimum credit score but it will be much lower than a traditional mortgage usually 100 points less.

You can submit non-traditional income documents for verification

No W2s, no problem. With non-qm loans, self-employed individuals now have more options for income documentation than qualified loans. Non-qm loan providers will look at the following:

  • Proof of income stability

  • Documents that show the financial strength of your business

  • Explain how your business can generate long term income

You can submit two months' worth of bank statements from your personal or business account and the last two years of tax returns.

Don’t let non-traditional income stop you from owning a home. If you think that a non-qm loan in Woodland Hills, CA is a good option for you, get in touch with one of our loan officers to learn more.

You can close a non-qm loan even with a higher DTI

If you have a high DTI that doesn’t qualify for a standard loan, a non-qm loan is a good option.

Most traditional loan programs require that your debt to income ratio must be lower than a certain percentage, non-qm loans offer buyers flexibility in this area set by lenders.

This means that even if your DTI is a few percentage points higher than the traditional loan standards, lenders may still accommodate your loan application.

Since lender’s requirements may vary, you can inquire with your loan officer for specific guidelines. 

Not all lenders offer non-qualified mortgages

Since non-qm loans aren’t backed by a federal government loan program, the risk for lenders is higher. This is why some lenders may not offer non-qm loans at all.

The good news is, with the rise in self-employment and the gig economy, more and more lenders are now offering non-qm loans.

If you are having trouble finding a non-qm loan provider in California that you can trust, look no further. Our loan officers can analyze your financial situation and offer the right products that can meet your needs.

Apply for a non-qm loan by Nuline Funding and get flexible financing products that cater to borrowers who don’t fit into conventional mortgage requirements. 

If you are buying a new home or refinancing, we can help you out. Get in touch with one of our loan officers today.

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.