Your Mortgage: Some unique loan programs for sure

Mike Miles

By Mike Miles

Last week’s column mentioned that was a growing demand (and marketplace) for non-QM loans. Remember what non-QM loans are? They are basically the modern version of sub-prime loans but without all the baggage of sub-prime loans. What I mean by “baggage” is that these loans have much more regulations, guidelines and underwriting requirements than did the true sub-prime loans.

Today’s non-QM loans have a wide audience; some can be credit score challenged, some can be credit event challenged and some can be income documentation challenged. Credit score challenges are different from credit event challenges. Credit event challenges would be for borrowers with foreclosures, bankruptcies and short sales. In most cases, these borrowers would also have lower credit scores but not always. It’s not uncommon for credit event challenged borrowers to have scores between 620 and 670 (not considered credit score challenged). Income documentation challenged borrowers would be for those that earn good income but don’t document it in a traditional way. There is also a type of borrower that is outside the parameters mentioned above – property investor that either wants to finance more units than conforming guidelines allow or who wants to finance commercial-zoned.

Now to a product highlight, a bank statement program. This is not a stated income program. Instead, this is a program that uses documented deposits in personal bank accounts as income. Typically, this is for self-employed borrowers that may earn more than what they report on tax returns (if the lesser reported income isn’t enough to qualify).

Basic criteria needed:

  • Minimum credit score: 650
  • Maximum debt-to-income ratio: 50%
  • Mortgage rates on credit: none in last 5 years
  • Minimum equity/down payment: 25%
  • Collections, tax liens, charge-offs: none in last 3 years
  • Employment type: self-employed only

Interest rates for this type of loan will typically range from 5 to 7 percent and will most often be amortized on a 5 or 7-year adjustable rate mortgage (ARM). Is this a risky loan? Sort of. There is income documentation by way of analyzing bank statements and the minimum equity of 25 percent leaves a lot of room for the lender to have a safety net in case a borrower was to default.

Feel free to contact our team to learn more about this program. This is a good product option for those that fit the parameters and also haven’t had success going the traditional route.

This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain Mortgage today.

Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268