A Mortgage Built for the Self-Employed
Have you heard? Bank Statement Mortgages are making a comeback! But don’t make the mistake of referring to them as a subprime loan.
Non-Prime Bank Statement Mortgage (Non-QM Loans) - What Are They?
Non-Prime Bank Statement Mortgages - or so-called “non-QM loans” - are simply loans that do not meet the tight standards imposed after the housing crisis that almost brought down the American economy in 2008.
Non-prime loans are certainly not the risky loans of times past. They require higher credit scores, some assets, and more equity than their subprime predecessors.
Industry experts say non-QM loan origination has the potential to grow to hundreds of billions annually in the near future, making non-QM and non-prime common household names in the next decade - just like FHA and VA are today.
Appetite Increases for Jumbo Bank Statement Loans
Self-employed individuals shopping for a mortgage above the conforming loan limit (currently at $453,100) have discovered just how difficult it can be to qualify for a Jumbo Loan because of challenging restrictions including:
- 680 Minimum credit score
- Debt-to-income ratios hard capped at 45%
- Cash reserves to cover one year of mortgage payments
But, with a new administration comes new rules.
Confidence in the economy is increasing, money is flowing, and some credit restrictions are relaxing - causing some lenders to blaze new trails by originating loans that are outside of the conventional box.
Why Non-Prime Loans Are All the Rage
Banks and large mortgage lenders have been terrified of buybacks and lawsuits. They’ve been ultra cautious, lending only to those who fall into a safe harbor as dictated by the rules of ability-to-repay (ATR) - requiring lenders to determine whether or not someone is able to pay back a loan.
Because they don’t fit the complex rules associated with a “qualified mortgage,” millions of Americans have been unable to buy or refinance.
But the popularity of Non-Prime Mortgages has skyrocketed and investment firms have taken notice, providing securitization for these private-label mortgage-backed securities - securitized mortgages that do not conform to the criteria set by government sponsored enterprises.
Now, lenders who are willing to step-out and fund these loans have the ability to originate yet even more loans.
Special Features of a Jumbo Bank Statement Mortgage
Jumbo Bank Statement Mortgage Loans have many benefits that set them apart:
- Loan amounts up to $7 Million. No mortgage insurance (MI) and no pre-payment imposed. Easier qualifying with expanded debt-to-income ratios up to 55%. An attractive feature on these loan programs is the option for an interest-only (IO) payment.
- Alternative income documentation. Jumbo Bank Statement Loans allow for alternative income documentation. Self-employed individuals can qualify based on deposits made to the last 12 or 24 months of business or personal bank statements.
- Higher loan-to-values. The main feature of a Jumbo Bank Statement Mortgage is the down payment and loan-to-value requirement. For Jumbo Loans you can buy with as little as 10% down and refinance cash-out to 85% of your home’s value.
- More Flexibility on Credit. Although, Non-prime Loans allow for credit requirements less restrictive than conventional loans, the higher the credit score, the lower the rate. Jumbo Bank Statement Mortgages have minimum credit score requirements, varying between 620 and 640. In addition, they have shorter time restrictions from major credit events; such as a foreclosure, bankruptcy, or short sale.
- Term Options. Besides the 5/1 and 7/1 ARM (adjustable rate mortgage), there is a fixed 30 -year term. However, with Jumbo Non-Prime Loans, the most popular is a longer-term option of 40 years with an interest-only feature for a lower monthly mortgage payment.
Ready to Get Started?
If you think you're ready for a Jumbo Bank Statement Loan of your own, learn more about how to qualify by downloading our free eBook, The Ultimate Guide for Self-Employed Bank Statement Mortgages.
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About HomeLife Mortgage
For more than 25 years, HomeLife Mortgage has built a strong reputation in California and Florida as a leading mortgage broker, servicing the needs of borrowers who have been unable to obtain conventional financing. HomeLife Mortgage is at the forefront of non-bank lending offering the next generation of mortgages including Jumbo Non-Prime Loans, Real Estate Investor Loans, Bank Statement Loans, FHA Loans and VA Loans.