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Non-qualified Mortgage Definition

How to Get a Non-qualified Mortgage

In recent years, the number of non-qualified mortgages or non-QM (NQM) loans has skyrocketed. But who is offering these loans? And are they really a good deal for consumers? To answer these questions, we took a closer look at what qualifies as an NQM loan and looked at some of the risks and benefits associated with them.

To better understand the definition of a non-qualified mortgage, you must know that this is not considered a qualified mortgage by the Federal Housing Administration (FHA). This type of loan is typically offered by non-bank lenders. In other words, government-sponsored entities can’t sell them since they do not meet certain criteria.

There are several reasons why a non-qualified mortgage might be offered. Perhaps the borrower does not meet all of the FHA guidelines for a qualified mortgage, or the loan is being offered as part of a package deal that includes other types of loans that are not qualified.

The benefits of a non-qualified mortgage typically include lower interest rates and fewer restrictions on how the loan can be used. However, these loans are less likely to be available to borrowers who need them the most, and they may require a higher down payment than a qualified mortgage.

What Exactly Is a Non-qualified Mortgage?

Now that you know the definition, let’s take a look at what is a non-qualified mortgage. Non-QM is a type of loan that is not typically offered to consumers by traditional banks. These loans are typically offered by non-traditional lenders, such as private mortgage companies or credit unions.

As mentioned above, this non-qualifying loan doesn’t meet the needed criteria of GSE, and they use non-traditional methods of income verification to help the borrower get approved for the desired home loan.

Qualified vs. Non-qualified Mortgage: What’s the Difference?

A lot of people get confused with qualified and non-qualified mortgages. Here we will explain their differences. Qualified mortgages are typically backed by the government, meaning you have a better chance of getting approved since the lender is more likely to be able to recoup your investment.

On the other hand, non-qualified mortgages are typically not backed by the government and are available from private lenders. Because these loans are not as reliable, you may have to pay higher interest rates and could face more difficulty getting your loan refinanced in the future.

In other words, deciding which one suits you the best depends on you and your needs. We do recommend you consult with an expert before making a decision.

Non-qualified Mortgages: Pros and Cons

Non-qualified mortgages offer a number of benefits for borrowers, but there are also some potential drawbacks to consider before taking out a loan. Here are four reasons to consider a non-qualified mortgage before making a decision:

Pros of non-qualified mortgages:

  • Available alternative documentation
  • More relaxed credit requirements
  • Available to foreign people
  • No limit on financed properties

Cons of non-qualified mortgages:

  • High down payments
  • Interest rates are higher
  • Higher chances of defaulting the loan
  • Not available by all the lenders


When it comes to the benefits of non-QM, they have a very good amount. This type of mortgage is available to both US citizens and also foreign citizens. This amazing pro allows even foreign people to buy their dream house. On top of that, you are not limited to how many properties you can buy and finance. And also, what a lot of people are worried about when taking a mortgage is a credit score, but with non-qualified mortgages, you don’t have to worry. They tend to have more flexible requirements.


As much as they have good sides, with this type of mortgage, your chances of defaulting on it are much bigger than with a traditional loan. On top of that, you will have to pay higher interest rates, and as well your down payment is going to be much bigger than if you took out a traditional mortgage. Because they are viewed as an alternative way of funding, not all lenders will have this option.

Who Are Non-qualified Mortgages Suitable For?

If you are in consideration of getting a non-qualified mortgage, we will give you examples in cases when they are suitable. Typically offered to borrowers who don’t meet certain qualifications, such as having a low credit score. This allows them to get a mortgage that’s typically more affordable than a qualified mortgage.

There are a number of reasons why someone might not be approved for a qualified mortgage. For example, if you have had previous delinquencies or have too much debt. Non-qualified mortgages can be a good option for borrowers who don’t meet the qualifications for a regular mortgage but still need access to financing.

Who Offers Non-qualified Mortgages?

There are many lenders that offer non-qualified mortgages to borrowers. These loans are not insured by the FHA, so they may require higher down payments and other qualifications, but they can still be a viable option for some buyers. Here is a list of some of the most popular lenders that offer these types of loans:

  1. Griffin Funding
  2. Quicken Loans
  3. MoneyNetUSA
  4. Lending Tree
  5. New American
  6. Preferred Mortgage

How to Get a Non-qualified Mortgage

Non-qualified mortgages are becoming more and more popular, especially with first-time homebuyers. These loans don’t have the same strict requirements as a qualified mortgage, so they may be a better fit for some people. Here are tips on how to apply for a non-qualified mortgage:

1. Shop around. There are a lot of lenders out there that offer non-qualified mortgages, so it’s important to do your research and find the best option for you. Compare interest rates, fees, and terms to find the best deal.

2. Prepare to prove your income. Typically lenders require borrowers to provide documentation of their income, such as pay stubs or tax returns. Make sure you have everything ready before meeting with a lender to speed up the process.

3. Gather the needed down payment. A lot of lenders require at least a 20% down payment on a non-qualified mortgage, even if you don’t have to pay PMI. This will help protect your home equity in case you can’t keep up your payments later on.

4. Know about interest rates. A non-qualified mortgage typically comes with higher interest rates than a traditional mortgage.

Bottom Line

When it comes to non-qualified mortgages, they can be an amazing solution for many people. They have great benefits that attract a lot of new customers to them, but you shouldn’t forget about the downsides also.

In this article, we took you through the explanation of non-QM, what they offer and how you apply for one. If you find yourself in a situation where you don’t have enough money, and your credit score is not good, you can use the information here and consider non-qualified mortgages. 

Whatever your decision might be, we hope you do the needed diligence and consult with an expert before taking out any type of mortgage.

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