Question about Pre-Approval Process for Non-QM Lenders
Colorado Springs, CO · Member since 2021 · 33 posts · 12 votes
Hello, I am in the process of getting a pre-approval before I start my hunt for my first rental property. My mortgage broker is pushing the idea of a non-QM lender being the one who funds this deal. My broker says I can be looking at 10% down and ~5% interest fixed for 30 years.
My question is this, I am very new to this (first time) and I want to make sure that I don't end up with such a high mortgage that I run too close to 0 on net cashflow. I have ~40k to spend total on down payment, closing costs, rehab, etc. I want to use this 40k to buy 2 condo properties to rent out. That being said, if I go conventional (20% down, 30 yr fixed etc.) that means I will not be able to buy 2 properties with my 40k, but I feel like there is benefit that I am not seeing.
This leads me to my overall question: What is your experience using non-QM lenders, and your advice for me?
P.S. I am located in Massachusetts
Thank you in advance!
I've been waiting for some fellow loan originator that I deem credible, either on the phone, in one of our private facebook groups, or somewhere else, to utter words to the effect of: "It was a smooth process, no hiccups, closed on a reasonable 30 day timeline, guidelines were transparent, and overall the investor/buyer/refinancer was happy with the process, minimal 'surprises,' just work with ABC Home Loans for that."
I've been waiting for about 5 years, since non-QM first started pinging the radar. I am still waiting...
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
I understand.
Thanks for the information Stephanie!!!!
Non-QM is a great loan product for self-employed. Wage earners use it as well. There is no DTI ratio and it is a rent qualifier (DSCR) program only. Most investor go this route because it is no income verification and less paper work which means less headaches. Deals can close in 2-4 weeks vs. conventional which could take a little longer and more underwriting stips. The other brokers in this thread are 100% correct with their assessment. Bottom line is... its all about the numbers. You have to decide do you want to go full documentation or no doc. Also, non-qm loans are non recourse. Not all, but most.
To clear up some incorrect information...
Non-QM is certainly not DSCR only. Non-QM encompasses a whole lot more than DSCR loans...Non-QM stands for Non Qualified Mortgage, meaning that it doesn't meet the requirements to be deemed a Qualified Mortgage which is outlined in a regulation called The Ability To Repay/Qualified Mortgage Rule. There are many things that make a mortgage a Qualified Mortgage but conventional, FHA, VA, and USDA cannot be anything other than a Qualified Mortgage. If the mortgage doesn't meet the requirements for being a Qualified Mortgage then it cannot be any of those agency loans I mentioned above. You can find out all sorts of info on QM's and what makes a Non-QM on the CFPB's website. Look up "The Ability To Repay/Qualified Mortgage Rule". Bottom line is that Non-QM is all sorts of loan programs, and technically they are just mortgages that CANNOT be a Qualified Mortgage.
Many, perhaps most, Non-QM products DO have DTI limits...There are full doc programs, bank statement programs, reduced doc programs, interest only, and all sorts of other things that can only be a non-QM. DSCR is only one type of Non-QM.
Conventional loans are more times than not, underwritten faster than Non-QM. Furthermore, many Non-QM programs are way more of a pain in the arse than conventional. Underwriting times are highly dependent upon the actual lender underwriting the file and point person/MLO/ processor that you're working with. I've got one lender that consistently gives same day decisions for conventional/FHA/VA/USDA and I can close refinances with no appraisal in roughly 10 calendar days. Then look at one of my lenders that does both conventional and Non-QM; their non-QM products have 4-5 day business day turn times while conventional is 2-3 business days. Generally, Non-QM is a pain the butt and only used for people who don't qualify for a better loan.
I also have to disagree with the assessment that "most" investors go with Non-QM because it means less headaches. Generally they do it because they can't qualify for a loan with more favorable terms, and the DSCR loan or other Non-QM product is their only/cheapest current path to ownership because it's not a hard money loan. If someone can save 2% or more on the rate with conventional you're suggesting they'd pay that extra 2% on the large sum of money they are borrowing so they can avoid uploading a few extra PDFs? My clients won't get that kind of advice...
@Hossam Elaskalani I just closed on 2 rentals in the last 2 months with HomeXpress mortgage on a non qualified loan and it was a breeze! Need 20-25% down (typical of any lender for non owner occupied), 720 credit score, and the rents need to cover the mortgage. I’m not sure what everyone is talking about with the headaches, for me it was a breeze and much more simple than doing conventional. I would recommend doing conventional if you can for the better rates, but 5.5% on the deals I just closed is not bad and is certainly better than not getting a property at all.
DOES ANYONE HAVE ANY OTHER NON-QM LENDERS
@Michael Glist
The HOA point is a great one to bring up thank you, just to confirm what you're saying in respect to the topic. If I go conventional and I don't decide to owner occupy one then rent the rest, then the qualifications for an investment property become even tighter when applying for conventional?
Thanks
If you go conventional and do not occupy the property and buy strictly as an investor the qualifications and guidelines are more strict. If you plan to purchase as an investment only you will also need to make sure that is ok with the HOA. Some have restrictions on allowing investors to purchase. They do this because if there are too many investors in a complex it makes it harder for people to purchase a unit as an owner occupant due to lender guidelines.
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
There is nothing about a Non-QM loan that allows a lender to violate the LO Compensation Rule or do things any differently with regards to margin and LO comp and that seems to be what you're suggesting. While some Non-QM lenders might allow pricing adjustments for repeat borrowers the MLO must still be paid in accordance with the LO Comp Rule and those pricing tweaks are often times applicable to agency clients as well. Margins are set up with Non-QM lenders exactly the same way as they are for all other lenders and LO Comp rules must be followed to be in full compliance.
Some lenders interpret the LO Comp Rule differently with regards to the type of comp, and will allow different margins to be charged on Lender paid vs borrower paid comp. I think that's exposure I don't want for my company because it opens the door to discrimination, but it's nothing to do with the actual product type and only regarding lender paid broker compensation vs borrower paid broker compensation.
@Hossam Elaskalani I just closed on 2 rentals in the last 2 months with HomeXpress mortgage on a non qualified loan and it was a breeze! Need 20-25% down (typical of any lender for non owner occupied), 720 credit score, and the rents need to cover the mortgage. I’m not sure what everyone is talking about with the headaches, for me it was a breeze and much more simple than doing conventional. I would recommend doing conventional if you can for the better rates, but 5.5% on the deals I just closed is not bad and is certainly better than not getting a property at all.
DOES ANYONE HAVE ANY OTHER NON-QM LENDERS
You experience is highly dependent upon the company and person/people you work with. You obviously found competent people to originate your loan.
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
There is nothing about a Non-QM loan that allows a lender to violate the LO Compensation Rule or do things any differently with regards to margin and LO comp and that seems to be what you're suggesting. While some Non-QM lenders might allow pricing adjustments for repeat borrowers the MLO must still be paid in accordance with the LO Comp Rule and those pricing tweaks are often times applicable to agency clients as well. Margins are set up with Non-QM lenders exactly the same way as they are for all other lenders and LO Comp rules must be followed to be in full compliance.
Some lenders interpret the LO Comp Rule differently with regards to the type of comp, and will allow different margins to be charged on Lender paid vs borrower paid comp. I think that's exposure I don't want for my company because it opens the door to discrimination, but it's nothing to do with the actual product type and only regarding lender paid broker compensation vs borrower paid broker compensation.
Most DSCR lenders don't offer lender paid options for the loans we do. Everything is borrower paid.
You are correct when talking about an owner occupied loan; I am only writing about non-owner occupied because that's all we do. I wouldn't want the exposure of non lender paid comp on owner occupied either.
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
There is nothing about a Non-QM loan that allows a lender to violate the LO Compensation Rule or do things any differently with regards to margin and LO comp and that seems to be what you're suggesting. While some Non-QM lenders might allow pricing adjustments for repeat borrowers the MLO must still be paid in accordance with the LO Comp Rule and those pricing tweaks are often times applicable to agency clients as well. Margins are set up with Non-QM lenders exactly the same way as they are for all other lenders and LO Comp rules must be followed to be in full compliance.
Some lenders interpret the LO Comp Rule differently with regards to the type of comp, and will allow different margins to be charged on Lender paid vs borrower paid comp. I think that's exposure I don't want for my company because it opens the door to discrimination, but it's nothing to do with the actual product type and only regarding lender paid broker compensation vs borrower paid broker compensation.
Most DSCR lenders don't offer lender paid options for the loans we do. Everything is borrower paid.
You are correct when talking about an owner occupied loan; I am only writing about non-owner occupied because that's all we do. I wouldn't want the exposure of non lender paid comp on owner occupied either.
The Loan Originator Compensation Rule applies to all "covered transactions". Covered transactions include ALL loans made to residential structures that contain 1-4 units. It is not limited to 1st liens or primary residences.
There is the same exposure regardless of occupancy. It's all about how the Rule is interpreted and what the compliance officer and executives think about that exposure. I think it's discrimination to charge different amounts for lender vs borrower paid and it's the core of what they were trying to prevent with the Rule in the first place. Furthermore, the amount of borrower comp is up to the broker not the lender and that is what opens the door to discrimination.
I have several outlets for DSCR with lender paid comp.
Non-QM loans are no income verification loans. Most commercial loans are based on rental income or the P&L and not the income of the borrower. There is no Debt to Income Ratio. It is solely based on the revenue of the collateral or projected revenue.
Everyone's experience is different. If you have less paperwork, there is less to underwrite. The experience of the consultant also comes into play. I close non-QM deals in 2 weeks vs. conventional may take up to 30 days for a refi and up to 45 days for a purchase. Again, this depends on the turnaround time for the lender. Fannie Mae has tons of guidelines when going conventional to purchase a second home or investment properties. Self Employed borrowers do not claim or show all of their income. So for this reason the non QM market was created and spawned out of the recession. It is a good product for self employed borrowers and or investors that want to streamline the process. As long as your end objectives are met, it really doesn't matter what loan product you chose or use.
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
There is nothing about a Non-QM loan that allows a lender to violate the LO Compensation Rule or do things any differently with regards to margin and LO comp and that seems to be what you're suggesting. While some Non-QM lenders might allow pricing adjustments for repeat borrowers the MLO must still be paid in accordance with the LO Comp Rule and those pricing tweaks are often times applicable to agency clients as well. Margins are set up with Non-QM lenders exactly the same way as they are for all other lenders and LO Comp rules must be followed to be in full compliance.
Some lenders interpret the LO Comp Rule differently with regards to the type of comp, and will allow different margins to be charged on Lender paid vs borrower paid comp. I think that's exposure I don't want for my company because it opens the door to discrimination, but it's nothing to do with the actual product type and only regarding lender paid broker compensation vs borrower paid broker compensation.
Most DSCR lenders don't offer lender paid options for the loans we do. Everything is borrower paid.
You are correct when talking about an owner occupied loan; I am only writing about non-owner occupied because that's all we do. I wouldn't want the exposure of non lender paid comp on owner occupied either.
The Loan Originator Compensation Rule applies to all "covered transactions". Covered transactions include ALL loans made to residential structures that contain 1-4 units. It is not limited to 1st liens or primary residences.
There is the same exposure regardless of occupancy. It's all about how the Rule is interpreted and what the compliance officer and executives think about that exposure. I think it's discrimination to charge different amounts for lender vs borrower paid and it's the core of what they were trying to prevent with the Rule in the first place. Furthermore, the amount of borrower comp is up to the broker not the lender and that is what opens the door to discrimination.
I have several outlets for DSCR with lender paid comp.
You are correct regarding exposure, in particular when you're speaking about owner occupied properties. The Rule is clear that on owner occupied properties, lender paid comp is law. Unfortunately, your interpretation of "covered transactions" is incorrect. It does not pertain to ALL loans made to residential structures that contain 1-4 units. An entire industry has evolved around the correct definition. Companies like Velocity, Visio, Lima One, HomeXpress, Finance of America, Silver Hill among dozens of others may have lender paid comp (most of these lenders do not offer lender paid comp), but not on DSCR or BUSINESS PURPOSE loans and more specifically to non owner occupied 1-4 unit, business purpose loans.
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
There is nothing about a Non-QM loan that allows a lender to violate the LO Compensation Rule or do things any differently with regards to margin and LO comp and that seems to be what you're suggesting. While some Non-QM lenders might allow pricing adjustments for repeat borrowers the MLO must still be paid in accordance with the LO Comp Rule and those pricing tweaks are often times applicable to agency clients as well. Margins are set up with Non-QM lenders exactly the same way as they are for all other lenders and LO Comp rules must be followed to be in full compliance.
Some lenders interpret the LO Comp Rule differently with regards to the type of comp, and will allow different margins to be charged on Lender paid vs borrower paid comp. I think that's exposure I don't want for my company because it opens the door to discrimination, but it's nothing to do with the actual product type and only regarding lender paid broker compensation vs borrower paid broker compensation.
Most DSCR lenders don't offer lender paid options for the loans we do. Everything is borrower paid.
You are correct when talking about an owner occupied loan; I am only writing about non-owner occupied because that's all we do. I wouldn't want the exposure of non lender paid comp on owner occupied either.
The Loan Originator Compensation Rule applies to all "covered transactions". Covered transactions include ALL loans made to residential structures that contain 1-4 units. It is not limited to 1st liens or primary residences.
There is the same exposure regardless of occupancy. It's all about how the Rule is interpreted and what the compliance officer and executives think about that exposure. I think it's discrimination to charge different amounts for lender vs borrower paid and it's the core of what they were trying to prevent with the Rule in the first place. Furthermore, the amount of borrower comp is up to the broker not the lender and that is what opens the door to discrimination.
I have several outlets for DSCR with lender paid comp.
You are correct regarding exposure, in particular when you're speaking about owner occupied properties. The Rule is clear that on owner occupied properties, lender paid comp is law. Unfortunately, your interpretation of "covered transactions" is incorrect. It does not pertain to ALL loans made to residential structures that contain 1-4 units. An entire industry has evolved around the correct definition. Companies like Velocity, Visio, Lima One, HomeXpress, Finance of America, Silver Hill among dozens of others may have lender paid comp (most of these lenders do not offer lender paid comp), but not on DSCR or BUSINESS PURPOSE loans and more specifically to non owner occupied 1-4 unit, business purpose loans.
You're saying I'm interpreting this when I've just copied from my policies and procedures which are based on the actual regulations. If you'd like a reference that's easy to find go to the small entity compliance guide and look at page 19 where is says "what loans does the rule cover"
(§ 1026.36(b))
It states, and this is copied from the CFPB guide:
Almost all closed-end consumer credit transactions secured by a dwelling (including any real
property attached to the dwelling) are subject to the provisions on compensation, qualification,
identification, and the establishment and maintenance of written policies and procedures for
compliance.
This includes loans made to consumers that are secured by residential structures that contain
one to four units, including condominiums and cooperatives. It is not limited to first liens or to
loans on primary residences.
The provisions on compensation, qualification, identification, and the establishment and
maintenance of written policies and procedures do not apply to:
Open-end credit plans including HELOCs
Time-share plans
The difference is business purpose vs consumer. Not the product type of QM vs Non-QM. I should have used the word consumer in my previous post.
Hossam,
You should consider house hacking. You will be able to buy in at 3.5%, and you live in one of the units or rooms for one year. After that, you will be able to stay or go as you wish, but it is your best option for starting with as little as possible money down while locking in an amazing interest rate that will give you free cashflow after a few years, especially if inflation goes up as it should.
@Stephanie P. I saw you listed several lenders for these types of loans. Do you know of any more? Is there a place where I can see a full list?
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
There is nothing about a Non-QM loan that allows a lender to violate the LO Compensation Rule or do things any differently with regards to margin and LO comp and that seems to be what you're suggesting. While some Non-QM lenders might allow pricing adjustments for repeat borrowers the MLO must still be paid in accordance with the LO Comp Rule and those pricing tweaks are often times applicable to agency clients as well. Margins are set up with Non-QM lenders exactly the same way as they are for all other lenders and LO Comp rules must be followed to be in full compliance.
Some lenders interpret the LO Comp Rule differently with regards to the type of comp, and will allow different margins to be charged on Lender paid vs borrower paid comp. I think that's exposure I don't want for my company because it opens the door to discrimination, but it's nothing to do with the actual product type and only regarding lender paid broker compensation vs borrower paid broker compensation.
Most DSCR lenders don't offer lender paid options for the loans we do. Everything is borrower paid.
You are correct when talking about an owner occupied loan; I am only writing about non-owner occupied because that's all we do. I wouldn't want the exposure of non lender paid comp on owner occupied either.
The Loan Originator Compensation Rule applies to all "covered transactions". Covered transactions include ALL loans made to residential structures that contain 1-4 units. It is not limited to 1st liens or primary residences.
There is the same exposure regardless of occupancy. It's all about how the Rule is interpreted and what the compliance officer and executives think about that exposure. I think it's discrimination to charge different amounts for lender vs borrower paid and it's the core of what they were trying to prevent with the Rule in the first place. Furthermore, the amount of borrower comp is up to the broker not the lender and that is what opens the door to discrimination.
I have several outlets for DSCR with lender paid comp.
You are correct regarding exposure, in particular when you're speaking about owner occupied properties. The Rule is clear that on owner occupied properties, lender paid comp is law. Unfortunately, your interpretation of "covered transactions" is incorrect. It does not pertain to ALL loans made to residential structures that contain 1-4 units. An entire industry has evolved around the correct definition. Companies like Velocity, Visio, Lima One, HomeXpress, Finance of America, Silver Hill among dozens of others may have lender paid comp (most of these lenders do not offer lender paid comp), but not on DSCR or BUSINESS PURPOSE loans and more specifically to non owner occupied 1-4 unit, business purpose loans.
You're saying I'm interpreting this when I've just copied from my policies and procedures which are based on the actual regulations. If you'd like a reference that's easy to find go to the small entity compliance guide and look at page 19 where is says "what loans does the rule cover"
(§ 1026.36(b))
It states, and this is copied from the CFPB guide:
Almost all closed-end consumer credit transactions secured by a dwelling (including any real
property attached to the dwelling) are subject to the provisions on compensation, qualification,
identification, and the establishment and maintenance of written policies and procedures for
compliance.
This includes loans made to consumers that are secured by residential structures that contain
one to four units, including condominiums and cooperatives. It is not limited to first liens or to
loans on primary residences.
The provisions on compensation, qualification, identification, and the establishment and
maintenance of written policies and procedures do not apply to:
Open-end credit plans including HELOCs
Time-share plans
The difference is business purpose vs consumer. Not the product type of QM vs Non-QM
Daniel
I'm sorry, but your policies and procedures are wrong. The correct interpretation for the loans my company does is under "Exempt transactions" 1026.3. It's Number 4 on the list. Here's a link:
https://www.consumerfinance.go...
What you're missing is the distinction the CFPB makes between "consumer" and "business" purposes.
This one exemption has spawned an entire industry.
"4. Non-owner-occupied rental property. Credit extended to acquire, improve, or maintain rental property (regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes. This includes, for example, the acquisition of a warehouse that will be leased or a single-family house that will be rented to another person to live in. If the owner expects to occupy the property for more than 14 days during the coming year, the property cannot be considered non-owner-occupied and this special rule will not apply. For example, a beach house that the owner will occupy for a month in the coming summer and rent out the rest of the year is owner occupied and is not governed by this special rule. (See comment 3(a)-5, however, for rules relating to owner-occupied rental property.)"
I'm really not trying to get into a pissing match, but the companies I listed earlier have much larger legal budgets than I do certainly and I'm absolutely certain they would not allow my company to originate loans that were illegal. I've been involved with this specific interpretation of business purpose vs consumer purpose loans since the distinction was brought forward at the outset of Dodd/Frank more than 10 years ago.
Stephanie
Pricing on conforming is set when the lender or broker gets set up with the company that will provide the funding to eliminate an unfair advantage borrower to borrower. It's generally not that way in non-qm. Each loan is priced separately and repeat borrowers get a little better pricing.
Stephanie
There is nothing about a Non-QM loan that allows a lender to violate the LO Compensation Rule or do things any differently with regards to margin and LO comp and that seems to be what you're suggesting. While some Non-QM lenders might allow pricing adjustments for repeat borrowers the MLO must still be paid in accordance with the LO Comp Rule and those pricing tweaks are often times applicable to agency clients as well. Margins are set up with Non-QM lenders exactly the same way as they are for all other lenders and LO Comp rules must be followed to be in full compliance.
Some lenders interpret the LO Comp Rule differently with regards to the type of comp, and will allow different margins to be charged on Lender paid vs borrower paid comp. I think that's exposure I don't want for my company because it opens the door to discrimination, but it's nothing to do with the actual product type and only regarding lender paid broker compensation vs borrower paid broker compensation.
Most DSCR lenders don't offer lender paid options for the loans we do. Everything is borrower paid.
You are correct when talking about an owner occupied loan; I am only writing about non-owner occupied because that's all we do. I wouldn't want the exposure of non lender paid comp on owner occupied either.
The Loan Originator Compensation Rule applies to all "covered transactions". Covered transactions include ALL loans made to residential structures that contain 1-4 units. It is not limited to 1st liens or primary residences.
There is the same exposure regardless of occupancy. It's all about how the Rule is interpreted and what the compliance officer and executives think about that exposure. I think it's discrimination to charge different amounts for lender vs borrower paid and it's the core of what they were trying to prevent with the Rule in the first place. Furthermore, the amount of borrower comp is up to the broker not the lender and that is what opens the door to discrimination.
I have several outlets for DSCR with lender paid comp.
You are correct regarding exposure, in particular when you're speaking about owner occupied properties. The Rule is clear that on owner occupied properties, lender paid comp is law. Unfortunately, your interpretation of "covered transactions" is incorrect. It does not pertain to ALL loans made to residential structures that contain 1-4 units. An entire industry has evolved around the correct definition. Companies like Velocity, Visio, Lima One, HomeXpress, Finance of America, Silver Hill among dozens of others may have lender paid comp (most of these lenders do not offer lender paid comp), but not on DSCR or BUSINESS PURPOSE loans and more specifically to non owner occupied 1-4 unit, business purpose loans.
You're saying I'm interpreting this when I've just copied from my policies and procedures which are based on the actual regulations. If you'd like a reference that's easy to find go to the small entity compliance guide and look at page 19 where is says "what loans does the rule cover"
(§ 1026.36(b))
It states, and this is copied from the CFPB guide:
Almost all closed-end consumer credit transactions secured by a dwelling (including any real
property attached to the dwelling) are subject to the provisions on compensation, qualification,
identification, and the establishment and maintenance of written policies and procedures for
compliance.
This includes loans made to consumers that are secured by residential structures that contain
one to four units, including condominiums and cooperatives. It is not limited to first liens or to
loans on primary residences.
The provisions on compensation, qualification, identification, and the establishment and
maintenance of written policies and procedures do not apply to:
Open-end credit plans including HELOCs
Time-share plans
The difference is business purpose vs consumer. Not the product type of QM vs Non-QM
Daniel
I'm sorry, but your policies and procedures are wrong. The correct interpretation for the loans my company does is under "Exempt transactions" 1026.3. It's Number 4 on the list. Here's a link:
https://www.consumerfinance.go...
What you're missing is the distinction the CFPB makes between "consumer" and "business" purposes.
This one exemption has spawned an entire industry.
"4. Non-owner-occupied rental property. Credit extended to acquire, improve, or maintain rental property (regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes. This includes, for example, the acquisition of a warehouse that will be leased or a single-family house that will be rented to another person to live in. If the owner expects to occupy the property for more than 14 days during the coming year, the property cannot be considered non-owner-occupied and this special rule will not apply. For example, a beach house that the owner will occupy for a month in the coming summer and rent out the rest of the year is owner occupied and is not governed by this special rule. (See comment 3(a)-5, however, for rules relating to owner-occupied rental property.)"
I'm really not trying to get into a pissing match, but the companies I listed earlier have much larger legal budgets than I do certainly and I'm absolutely certain they would not allow my company to originate loans that were illegal. I've been involved with this specific interpretation of business purpose vs consumer purpose loans since the distinction was brought forward at the outset of Dodd/Frank more than 10 years ago.
Stephanie
Re-read the bottom of my post where I said exactly "it's business purpose vs consumer" and not QM vs Non-QM.
You were saying that Non-QM loans don't have to follow the Rule when in fact they do if they are consumer loans. We are mostly on the same page.
@Stephanie P. I saw you listed several lenders for these types of loans. Do you know of any more? Is there a place where I can see a full list?
No, there is no comprehensive list. You need a good mortgage broker that can ask the right questions, find out about your specific situation and then put you with the right lender for reasonable compensation. You could spend hours and days trying to figure out whether your loan should go to this lender or that one only to find you didn't have enough cash for reserves, you had a large deposit you didn't explain or that the one place you thought would be perfect doesn't lend in Cook County or Detroit or wherever you wanted them to. Most of those lenders I listed are wholesale lenders and don't have a retail presence or if they do, their guidelines are very specific. Again, get a good broker and call or email her/him. You'll save time and effort.
Stephanie
@Stephanie P.
How would you recommend I go about finding a good broker? I’ve talked to several, but they don’t have a clue what what I’m talking about
@Stephanie P.
How would you recommend I go about finding a good broker? I’ve talked to several, but they don’t have a clue what what I’m talking about
PM me. I'll recommend one.:)
I am also looking for a non-QM loan that would be for an estate I inherited when my mom passed away. It's a really delicate situation and no FHA/Conventional companies will touch it. I've been told to specifically look for non-QM brokers and haven't had any luck. The property is located in Mississippi.