Before knowing the answer to this question, we have to first understand what a QM and Non-QM mortgage is. QM stands for “Qualified Mortgage.” Non-Qualified Mortgages are mortgage loans that do not fall into the Qualified Mortgage lending guidelines. Don’t let the name scare you away. Non-Qualified Mortgages have existed for several years and were created to service an underserved market of borrowers that don’t qualify for Qualified Mortgage. Alternative options such as Non-QM loans were simply put into play after the 2008 Mortgage and Credit Meltdown. QM Mortgage is when a lender has qualified a mortgage borrower’s ability to repay their mortgage loan, and Non-QM is perfect for borrowers who could not qualify previously for a mortgage due to the strict lending guidelines on government and conventional loans.

Benefits of Non-QM Loans:

• No waiting period after bankruptcy and/or housing event
• Asset Completion Loan Program
• Bank statement loans for self-employed borrowers
• Late payments in the past 12 months are not deal breakers
• 95% LTV Jumbo Loans
• 95% LTV Debt Consolidation Loans
  
  

Benefits of QM Loans:

• Mortgage rates and fees are slightly lower
• Can resell their loans on the secondary market to Fannie/Freddie
• Normally sold to other secondary markets to private investors or held by the lender under their own portfolio
• Insured by FHA, VA, USDA, Fannie, Freddie
• Creates a layer of protection for lenders from liability from mortgage loans and borrowers
• The Safe Harbor Act under Qualified Mortgage, offers protection against mortgage lenders against borrowers from lawsuits
• Lenders are protected against borrowers who claim that they were extended home loans by lenders when they did not have the ability to repay their mortgage payments
• Created and launched to protect both lenders and consumers against risky lending that created the mortgage and credit meltdown of 2008
• Lenders who abide by QM Rules can package their loans and resell them in the secondary open market to Fannie and Freddie
• Free up their warehouse lines of credit and originate and fund more mortgage loans
• Minimize the origination and funding of loans that are considered risky
• Void the chances of these loans going bad and into foreclosure
• Avoid another mortgage meltdown like the one we had with the 2008 mortgage and real estate meltdown

Qualified Mortgage requires that the lender has qualified the borrowers:

• Income
• Liabilities
• Monthly debt payments
• This is done so the borrower does not take on more debt than to exceed 43% debt to income ratio of their pre-tax monthly income
• Requires that borrowers not be charged more than 3% in total fees and points
• Mandates that a lender does not issue riskier and/or overpriced mortgage loans