April 19, 2022
If you’ve experienced a recent credit event that ended up damaging your credit, you may be thinking that qualifying for a mortgage is not possible, and that a jumbo loan with traditionally stricter guidelines is even further out of reach. The thing is, credit mishaps are common and, yes, can make qualifying for a mortgage loan more difficult, but it’s not impossible. If you’ve been denied a mortgage because of a credit event, it may be the best time to explore non-traditional options – like non-qualified mortgage (“Non-QMs”).
Non-qualified mortgages = non-traditional borrower options. Non-traditional means that the qualifying guidelines and loan terms are less restrictive than traditional mortgage options. Non-qualified mortgages (non-QMs) are ideal financing solutions for borrowers who may not meet the qualifying criteria for traditional mortgages. Unlike FHA, VA, or Conventional loans, and other qualified mortgages, non-QMs are not backed or insured by government agencies – which is why qualifying criteria may be more lenient, in comparison, and less strict.
When it comes to non-qualified mortgages, there are many common misconceptions surrounding their legitimacy and perceived risk. Here’s the truth:
Myth #1: Non-qualified mortgages are high-risk loans designed for subprime, high-risk borrowers.
Myth Debunked: The Non-QM market share is growing not because there has been an increase of high-risk borrowers entering the mortgage market, but because lenders are meeting the demand for tailor-made financing solutions built for buyers with unique finances in mind.
Myth #2: It’s harder to apply for a non-QM.
Myth Debunked: While it may be more difficult to find mortgage lenders who offer a wide variety of non-QMs, non-QMs are not more difficult to apply for compared to traditional mortgages. The application process is nearly the exact same as qualifying mortgages.
For borrowers who fall just outside of strict jumbo loan guidelines, SmartEdge may be a perfect financing solution. What’s different? Non-traditional features, flexible guidelines, and interest-only payments. Life happens, and because borrowers have unique credit histories and circumstances, SmartEdge has been designed to open more doors for borrowers that would otherwise not be able to achieve their homeownership dreams.
SmartEdge is a great solution for borrowers who have had a credit event in the past that prevents them from qualifying for conforming loans, including:
With more relaxed qualifying criteria, borrowers are able to secure jumbo-sized loans easier compared to conforming loans. SmartEdge offers loan amounts up to $3 million, allows alternative income documentation, like assets, to qualify, and only requires a 2-4 year wait time to apply after a serious derogatory credit event. Additionally, higher debt-to-income ratios are allowed, giving borrowers even more qualifying flexibility.
Because alternative income documentation may be used to qualify, SmartEdge opens the door for a variety of homebuyers to achieve their homeownership dreams. For example, someone who sold a business for a large profit could afford a more luxurious, expensive home, but may not have W-2s to prove cash flow. SmartEdge could make sense in this scenario. Other borrowers who could benefit include former athletes, trust fund inheritors, a retiree, restricted stock owners, a borrower with high assets and low income, and more!
#1: A former professional athlete who invested the majority of his earnings in real estate was ready to apply for a jumbo-sized mortgage. After a financial crisis, he had to foreclose on one of the properties. After rebounding financially, he was happy to hear that although he experienced a foreclosure three years prior, he was able to qualify for SmartEdge and purchase a new million-dollar rental property.
#2: A borrower sold a multi-million-dollar business, set up a trust fund for her family, and invested in stock. Because she has no reportable income from the last few years, she was unable to qualify for a jumbo loan to purchase a home. Instead, her assets were used to qualify her for her SmartEdge.
Does SmartEdge sound like the best loan option for you? Does the flexible nature of non-qualified mortgages resonate with you? Have you been denied a jumbo mortgage because of a recent credit mishap? Rest assured knowing that we have seasoned non-QM underwriters who are trained specifically to review and approve our Smart Series loans, experienced operations teams working behind the scenes to keep your loan on the fast track to the closing table, and non-QM certified loan officers who are certified to recommend loan options that work for you.
Get in touch with one of our Loan Consultants to learn more.
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