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Non-Prime/Non-QM Loans
Non-Qualified Mortgage loans and Non-Prime loans are types of home loans designed for borrowers who may not meet the main requirements of traditional mortgage programs such as conventional loans.
What is a Non-QM Loan?
Non-QM loans are mortgages that don’t meet the guidelines for a Qualified Mortgage, which is set by the Consumer Financial Protection Bureau. A QM loan generally has strict criteria which includes limits on DTI ratios, documentation and loan terms to ensure the borrower has the ability to repay the loan.
Features of Non-QM Loans:
Flexible income verification: For income verification, borrowers can use alternate forms such as bank statements and more.
Self-employed borrowers: these loans cater to self employed borrowers who may have difficulty documenting their income since it tends to vary.
What is a Non-Prime Loan?
Non-prime loans are a subcategory of Non-QM loans. They cater to borrowers with lower credit score or other factors that make them ineligible for conventional loans.
Features of Non-Prime Loans:
Lower credit score requirements
Less strict down payment requirements: Non-Prime Loans may allow lower down payment costs.
While these loans provide more flexibility, they may come at the cost of higher interest rates and other fees. However, for many borrowers, they provide an opportunity for homeownership that other options cannot.
Remember, that these minimum requirements apply to some of our loan options. There are many other alternatives and requirements available as well.
September Mortgage Rates
Mortgage rates have remained fairly steady with some fluctuations depending on the loan type. According to Bankrate, on September 30th, we ended the month with an average of 6.22% for a 30-year fixed, 5.41% for a 15-year fixed rate, and 5.75% for a 5/1 adjustable mortgage rate.
Mid-September, the central bank cut interest rates by a half-point, that is the first such move since the pandemic. The Fed also said, depending on economic data, another rate cut might come this year.
One thing to remember is individual rates will vary. Rates also depend on your credit score, loan amount and more. Make sure to stay on top of mortgage rates so you can get the best deal for your dream home!
What Does This Mean For You?
As Homebuyers:
The 30-year fixed-rate mortgage at 6.67% means lower monthly payments compared to rates from earlier this year reaching well over 7%.
As Homeowners:
*If qualified, refinancing may be a great option! If you purchased a home when rates were higher, this could be a great opportunity to lower your monthly payments.
Housing Market - Compared to Recent Years:
Elevated rates have caused some buyers to delay purchases, contributing to slower market activity. As a result, there might be less competition for homes, potentially driving prices down slightly in certain markets.
According to NASDAQ, Mortgage rates are expected to stay in the 6% to 6.2% range through the remainder of 2024, so market conditions may stabilize rather than seeing dramatic drops in rates.
These rates highlight the importance of speaking with a professional on alternative financing solutions, such as Non-QM loans or down payment assistance programs, which may help mitigate the burden of higher rates.
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