When looking for hard money loans in Houston, you'll realize that lending falls into two main categories: non-qualified mortgage and qualified mortgage loan. Although these loans provide lenders with much-need financial assistance, they're also different. Understanding the two types of loans is paramount when taking a mortgage. Continue reading for more information on how to select a loan that suits you.
Qualified Mortgage Loans Definition
You'll realize that Houston hard money lenders consider a set of qualification requirements during your home buying process. Qualified mortgage (QM) loans are a type of loan that meets specific requirements by the Consumer Financial Protection Bureau's (CFPB) for QM loans. These requirements' main goal is to create safer loans by keeping the market free of certain high-risk features.
QM loans' main benefit is that if you're unable to pay, there's liability protection. However, the key disadvantage of QM loans is that you must meet the strict CFPB requirements to qualify for these loans.
Lending institutions can benefit from the much less risk associated with QM loans. This is because they can evaluate borrowers before giving them loans to determine if they can pay without facing financial hardships.
However, the strict requirements associated with QM loans bar many people from accessing hard money loans in Houston. As such, lenders are unable to attain a significant proportion of potential borrowers.
Non-Qualified Mortgage Loan Definition
A non-qualified mortgage (non-QM loan) is the type of loan that doesn't comply with the CFPB QM requirements. Non-qualified mortgage loans are especially ideal for those who don't qualify for QM loans.
You can apply for a non-qualified mortgage loan if you're a:
- Prime or non-prime borrower
- Medical practitioner
The main advantage of non-QM loans is that you can qualify even when you have credit issues that disqualify you for QM loans. Another benefit of non-QM loans is that you can borrow when you have complicated income structures such as self-employment.
If you have a poor credit rating or lower income or both, you can qualify for a non-QM loan even when your debt-to-income ratio exceeds 43%. Lenders rely on this measure to determine if a person can afford the loan.
Houston hard money lenders can benefit from the high number of non-QM loan borrowers present today. However, lenders must protect themselves by considering many critical financial factors. Non-QM loans transfer more risk to the lenders.
Non-Qualified Loans Evolution
Prior to the 2008 Financial Crisis, borrowers could qualify for subprime mortgages (a form of Non-QM) quite easily. In the end, many borrowers could not afford the loans. The real estate collapsed, crippling the entire economy. Although non-QM loans are making a comeback, they're quite different from those that existed before the economic meltdown.
Get Mortgage Loan from Experts Now
contact AMI Lenders as we can service both non-QM and qualified mortgage loans.
For over 30 years, AMI Lenders have been have been providing financing options to individuals in the Houston area. If we aren't able to assist you, we'll be happy to direct you to someone who can. Contact us for any questions or concerns.
We are always here to help!