The Benefits of Non-QM Lending During a Volatile Market

Written By: Colleen Coleman

Home inventory is low. Prices are rising and interest rates are fluctuating. We sat down with industry expert Account Executive, Colleen Coleman to gain some helpful insights on why brokers and borrowers can look to additional borrowing options from Non-QM mortgage loans during this time of uncertainty.

Rising Real Estate Investment

While volatility in the housing market may be seen as a problem for some, there’s one huge group of borrowers who view current conditions as an opportunity: real estate investors. Redfin reports that in the third quarter of last year, 18.2% of all home purchases in the United States went to investors, close to one in five sales. This marked an 11.2% increase in investment purchases over the year before. Non-QM products such as Investor Cash Flow loans are often a great fit for these investors.

QM Meets the Needs of Today’s Workforce

The housing market isn’t the only place we’re seeing significant change; the U.S. employment landscape is also shifting. According to Pew Research, today about 16 million American workers identify as self-employed. Microbusinesses flourished during the pandemic, with a record number of people starting online businesses. These entrepreneurs may not have the financial profiles that fit more traditional financing options, and so may benefit from the options of Non-QM loan products.

A Reasonable Approach to Credit Scores

Colleen explained to us, seasoned mortgage brokers know that credit scores aren’t the final word on a borrower’s ability to repay a loan, even though some lenders may treat them as such. According to the Consumer Financial Protection Bureau, over 25 million adults in America have no credit history, and nearly 20 million adults are un-scorable with little credit history – totaling 45 million “credit invisible” people. In short, the credit system is failing millions of Americans. And many potential homebuyers see credit-score issues as an immovable obstacle to owning a home. But millions of potential creditworthy borrowers may benefit from Non-QM’s more liberal consideration of credit scores.

A Debt-to-Income Solution

Along with potential borrowers, most brokers have been watching today’s rising interest rates with keen interest. This increase not only prices out some potential homeowners, it also impacts the important debt-to-income (DTI) ratios that are used in determining eligibility for many mortgage loans. Non-QM has a solution to this rising problem; Asset Qualifier loans don’t calculate DTI, but rather base eligibility on liquid assets, such as savings or securities accounts.

Do you have clients who may benefit from the suite of Non-QM products from Luxury Mortgage Wholesale? Contact us today.