Listening to the news, one hears a lot about home loans that no longer exist. New regulations require mortgage lenders to offer mortgages with austere guidelines on borrower’s debt-to-income ratios and income and low flexibility. These loans are called "qualified mortgages" (QM)s. Lenders who fund them get many benefits, like the ability to sell these loans as mortgage-backed securities, as well as protection from litigation in a borrower default. That makes QMs attractive and many lenders won't issue other kinds of home loans.
QM loans don't work for everyone, and lenders are looking for other options. Some offer loans that don’t require borrowers to provide tax returns to prove their income. Applicants do have to show they can afford the loan with bank statements. Lenders want to see high credit scores and money in the bank. Applicants should not expect to buy property with 5% down without tax returns, W-2s, pay stubs, and a down payment of at least 20%.
QMs require at max 43% debt-to-income ratios- no more than 43% of your gross income may be used for housing expenses and monthly obligations. Applicants earning $10,000 a month may spend $4,300. If the applicant has $1,500 in automobile payments and $500 in credit card dues, no more than $2,300 can be spent. Some lenders offer jumbo mortgages with a 55% debt-to-income ratio. Others allow interest-only payments which can be attractive to high earners- these loans offer lower payments when cash is tight.
SIMs are more likely to be found with mid-sized and smaller lenders. Try searching for "stated income loans," "no conformity," "alternative document," "portfolio loans," "asset-based loans," "non-ratio loans,” and "alternative income confirmation loans." Try shopping for mortgages in markets with many lenders and clients where it’s easy to compare programs and costs.
For more information on Mortgage Loan Programs, get in touch with the loan professionals at Midland Mortgage today.