Do you have non-conventional borrowers who might benefit from non-conventional loans? When you have limited loan products to offer, some of your borrowers may end up looking elsewhere for a mortgage. But what if you could partner with a lender that carries more flexible solutions?
Newrez is national lender that securitizes, underwrites and services loans in-house. Newrez's non-qualified mortgage (non-QM) loan series offers flexible alternatives for borrowers with unique income situations, credit challenges or investment property goals.
On the latest episode of the Broker Buzz podcast, Tony Kottenbrock, Head of Wholesale at Newrez, spoke with a panel of non-QM Newrez experts to explore five versatile products that can help brokers close more deals and serve less-traditional clients. Whether you're working with retirees, self-employed business owners or investors, our non-QM products can help transform challenging scenarios into closed loans.
5 Non-QM Loan Products from Newrez
SmartEdge (Full Documentation)
When borrowers fall just outside standard agency or prime jumbo loan programs, SmartEdge is a great alternative to help borrowers get the financing they need.
Full documentation non-QM loans are ideal for conversion scenarios. These occur when a borrower initially qualifies for an agency loan, but a change in circumstances —such as a lower credit score or an increased debt-to-income (DTI) ratio—causes them to longer meet certain lending guidelines.
This loan may also be advantageous when the property isn’t eligible for an agency loan, for instance if the property is a non-warrantable condo.
Key benefits
Underwritten in-house, SmartEdge loans have less rigorous qualifying conditions than conventional loans. We may accept borrowers who have a late payment in their records. We may even accept borrowers with a derogatory credit event in their history such as a foreclosure that would usually reduce their chances of getting a mortgage.
Another benefit: SmartEdge loans are suitable for borrowers who need a cash-out refinance† earlier. Instead of waiting 12 months, our full doc loans may enable borrowers to take cash out at just six months of ownership. This amount could be up to $1 million cash-in-hand at 50% loan-to-value (LTV) or less.
Historically, many of our SmartEdge loans have been approved with some exceptions made on our typical lending requirements. We have provided some flexibility on a case-by-case basis because we prefer to look at each borrower’s circumstances when approving. If a borrower doesn’t meet 100% of the loan requirements, our servicing team may examine the borrower’s case more in detail and potentially come up with a solution.
How can borrowers qualify?
While SmartEdge follows Fannie Mae® guidelines for full doc income, we offer greater flexibility to those who don’t meet traditional agency guidelines.
Borrowers are required to have:
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A 660 minimum credit score
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85% LTV for primary residences
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50% DTI ratio
SmartSelf (Bank Statement/1099 Program for Self-Employed Borrowers)
Our SmartSelf loans are for borrowers who are self-employed and lack traditional income documentation. They use the same parameters as the full doc loans and can apply to primary homes, secondary homes, or investment properties.
Key benefits
We’ve made it easier for self-employed borrowers to qualify by removing certain approval requirements such as business profit and loss statements or taxes. We look at what really matters—income and cash flow. The loan is also flexible enough for borrowers to use a combination of different income streams to qualify, making it suitable for more complex cases.
Loan amounts for this product can reach up to $3 million.
How can borrowers qualify?
To be eligible for this product, borrowers need to have been self-employed for at least two years with the bank statements to back it up.
Alternatively, self-employed borrowers who operate as contractors can also use 1099s to qualify. Other sources of income can also be combined with bank statements to be eligible, including W-2s or rental income, as long as the bulk comes from business income.
We also look at the expense ratio for their business, which counts for about 50% of loan qualification. Borrowers can opt to reduce that to as low as 15% if they can provide a CPA or tax preparer letter confirming their business expense percentage. This enables borrowers to rely on more income to qualify.
Borrowers are required to have:
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At least two years of self-employment history
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12 or 24-month bank statements
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Minimum 660 credit score
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90% LTV for primary residence or 85% for second homes or investment homes
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50% maximum DTI ratio
SmartEdge Asset Qualifier
Qualifying assets can include investment accounts (85% of assets), retirement accounts (50% of assets), or 100% from savings balances.
Key benefits
The great thing about this loan type is that it eliminates the need for income documentation, meaning that borrowers with large assets but non-traditional or inconsistent income can still get approved for their loans.
How can borrowers qualify?
When determining qualification, we want to verify that total assets left over after closing are enough to live on for several years. Assets must be adequate to not only cover mortgage payments, but average living expenses.
Borrowers are required to have:
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Minimum 20% down payment
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$500,000 in post-closing assets
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Assets that cover projected expenses for 60 months
SmartVest and SmartVest Platinum (Investment Rental Income)
Real estate investors may be interested in our SmartVest or SmartVest Platinum loans, which allow investors to qualify based on property cash flow. We offer ways to estimate and project rent for potential investments.
Key benefits
One thing that makes this product unique is that we can use AirDNA® reports to make projections on short-term rental income, giving us a clearer idea of potential cash flow. All you need to do is supply us with details of the property your borrower wants to buy and we’ll create a report based on factors including the property type, size and location.
The SmartVest product also offers interest-only options, cash-out refinance, and the ability to close within an LLC entity.
How can borrowers qualify?
Borrowers can be first-time or seasoned investors acquiring long-term or short-term investment properties.
Seasoned landlords can put down as little as 15%, though the requirement is bumped up to 20% for those investing in short-term rentals. First-time investors will need at least one year of landlord-tenant experience in the past three years and a 25% minimum down payment.
Borrowers are required to have:
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A minimum debt service coverage ratio (DSCR) of 1.0 for seasoned landlords (or 0.8 with a 30% down payment)
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30% down payment for foreign national investors
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25% down payment for first-time investors
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660 minimum credit score
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80% LTV for purchases and refinances
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75% LTV for cash-out refinances
As an alternative, we also offer a platinum version of SmartVest. This product works in a similar way to the non-platinum version but features different LTV requirements and pricing.
Partnering with Newrez
The pool of borrowers in the U.S. is extremely diverse, and we believe that home loan options should accommodate a wide variety of needs.
Many borrowers struggle to acquire financing through traditional or government loans because of their unique circumstances. By partnering with Newrez, you can offer flexible solutions that fit each individual borrower. Your business might gain a competitive advantage by offering tailored support in a borrower’s homebuying journey.
Curious to learn more? Contact us today and become an approved Newrez broker. If you’re already partnered with Newrez, reach out to your account executive today to learn more about our non-QM series.
Fannie Mae® is a registered trademark of the Federal National Mortgage Association. AirDNA® is a registered trademark of AirDNA LLC. None of the above-mentioned companies are affiliated with Newrez LLC.
For real estate and mortgage professionals only and not intended for distribution to consumers or other third parties.