Mortgage refinancing in the US recently dropped to a 22-year low. Together as an industry, we are encountering ever more unique and changeable financial circumstances. If you aren’t yet fluent in Non-Qualified Mortgage (Non-QM) Loans, diversifying your portfolio to include them helps you meet the needs of more borrowers, especially those weathering the current housing crisis – and highest interest rates for 30-year fixed loans. Non-QM originations are key at a time when established homeowners may no longer be lucrative, guaranteed sales as in the past.
Today’s borrowers want loan originators who can help them find flexible financing, fast. In turbulent times, they seek the security of home ownership without having to sacrifice their current balance already gained.
To compensate, mortgage loan originators must ensure their product offerings serve more diverse borrowers, covering the spectrum of lifestyles of a post-pandemic economy. The life of many potential borrowers doesn’t fit into the conventional criteria of a qualifying agency mortgage. These people might struggle with finding a loan that meets their specific needs using cut-and-copy methods.
This is where non-qualified mortgage loans come into the limelight! With commitment and artistry (and the steps below) you can help them shine for your next lead.
Know Why Non-Qualified Mortgages Matter
Non-QM loans don’t meet the Consumer Financial Protection Bureau’s (CFPB) requirements for a home loan. Generally, they are unconventional loans that provide borrowers with the opportunity to repay their loans under alternative channels.
This sector of the mortgage industry has grown since the Coronavirus pandemic, as more borrowers look to leveraging non-QM products to take more cash out to handle inflation.
As with any investment, non-QM loans come with some risk, but in the words of Benjamin Graham, successful investing is about managing risk rather than avoiding it. It’s critical to understand the nuances!
Managing risks with non-QM loans requires mortgage lenders to master the art of the product. Lenders are responsible for providing products that suit all types of home-buyers. Being knowledgeable about non-QM loans can empower you to best assist any future homeowner find their ideal loan and mortgage.
Mastering the art of non-QM originations requires a commitment to understanding the prospective buyers, gaining expertise in the sector and using technology to educate brokers to sell these products.
Understand Your Prospective Buyer
Lenders need to ask themselves how they can not just close the business they are getting but increase the number of loans they can sell. A major part of this equation is understanding the types of borrowers who would be well-suited to purchasing a non-QM loan.
Prospective buyers for non-QM products are those that might not qualify for a traditional mortgage. These borrowers might have less predictable income or income that is difficult to document.
The majority of people who purchase non-QM loans are self-employed. According to the Pew Research Center, there are 16 million self-employed individuals in the US. As these borrowers might not receive a regular payslip, they might need to present alternative documentation, such as bank statements, to be eligible for a non-QM loan.
Individuals with a large net worth might purchase a non-QM loan because the higher rates yield good liquidity.
Another large demographic of individuals purchasing non-QM products are property flippers or real estate investors. As their income is made through assets like property, debt-service-coverage ratio (DSCR) loans are perfect to promote to these borrowers.
Scratch Up on Your Product Knowledge
Lenders need in-depth product knowledge to truly master the art of non-QM origination. Becoming a product knowledge expert in the non-QM sector makes you a business that most brokers and borrowers should seek connections with.
Non-QM lending can feel like a risky decision for those brokers and borrowers unfamiliar with the process; they will look to choosing lenders that are confident in this space who will educate them about finding the loan that suits them.
A lender specializing in non-QM products can better assess each individual’s circumstances and recommend a suitable loan. They’ll need to commit to the best practices without fail, hunt down alternative methods for calculating and documenting non-conventional incomes, and be fluent in the best products to recommend to brokers and borrowers.
Non-QM lending is not a reactive process – it is proactive. By taking a proactive approach, lenders can plan products that are consistent with mortgage trends and can combat fluctuating rates.
Strengthen knowledge about what properties qualify for DSCR loans, credit scores, cash-out options, loan-to-value ratios and the maximum loan amounts for non-QM products. Know what documentation is needed for underwriters to prove a borrower’s income – they can include bank statements, 1099 forms and credit reports.
Use Tech-forward Initiatives
Just being an expert in the field of non-QM lending is not enough in 2022; lenders must ensure a strong technological presence in the mortgage market. When brokers and borrowers are stumped with questions about non-QM, one of the first points of inquiry is to find the answer online.
Lenders can build an online presence in the mortgage industry with ReadyPrice. Brokers can use this powerful pricing engine to find and connect with lenders to gather more information about their products (including non-QM loans) for their customers.
ReadyPrice boasts a great opportunity for lenders with their education and training corner. Free to access for registered members, lenders can bring value to the broker by helping them learn about the non-QM sector.
Lenders can use ReadyPrice software to connect directly with brokers without hassle, a middleman or additional cost. Networking and building relationships with others are vital for matching non-QM products with each individual’s unique circumstances.
Master the Art of Non-QM with ReadyPrice
It is time to start strategically planning for 2023; the non-QM market is one of the largest growing spaces in the mortgage industry and can bolster your business immediately. Mastering the art of non-QM is not as difficult as you might think – it starts easily with the right partnership.
The ReadyPrice team has the people and the technology you need to cover Non-QM bases.
Crafted just for industry professionals, ReadyPrice software ensures simplicity and is flexible for every lender (and borrower’s!) needs.
To see what ReadyPrice can do for you, contact the team and request a free demo. ReadyPrice software is simple to grasp and use – in only 15 minutes the team can demonstrate all the features you need to start mastering the art of non-QM originations.