Say “Yes” To More Borrowers With non-QM
When was the last time you turned away a borrower for not meeting agency loan requirements? If you’ve recently said “no” to such a borrower, then you’re losing revenue. Saying “yes” to borrowers with non-traditional or commission-based income streams is easier than you may think, especially when you partner with an experienced non-QM lender.
“With interest rates low, there’s so much low-hanging fruit on the agency side that many brokers don’t see the large number of borrowers who can benefit from non-QM.” notes Paul Howarth, SVP Western Region at Sprout Mortgage. “Experienced brokers who have gone through up cycles and down cycles in the mortgage industry recognize that they can secure their business, today and into the future by working with borrowers who are ideal non-QM candidates.”
“Brokers who have experience in the mortgage industry understand the value of diversifying their business to handle all economic climates; they know they should be doing both agency and non-QM loans. Brokers who have been in the industry for five to seven years have not had to work with a down cycle and should be preparing their business now for that day. All brokers can benefit from starting to do non-QM loans today, then increasing the proportion of Non-QM business as agency business starts to fall off.”
Non-QM borrowers are everywhere
It is estimated that there are millions of borrowers whose needs are not met by agency loan programs, who are credit-worthy with strong income, but have a harder time documenting it. The majority of these non-QM loan candidates have the means to buy a home and repay a mortgage, yet they’ve been turned away by conventional lenders because they have a non-traditional or commission-based income stream, a higher debt-to-income ratio, or because they’re investing in multiple income-producing properties.
The non-QM audience includes self-employed professionals, real estate investors, high net worth individuals, foreign nationals, and retirees with significant savings, all of whom can be served with non-QM loans.
When you’ve already spent marketing dollars on customer acquisition, every prospect should be nurtured. One golden rule of marketing is never ignore the networking potential from even one customer — especially because many non-QM borrowers are high net worth individuals with large networks of friends and business associates that are looking for a savvy broker they can rely on for their real estate financing. Too many brokers let that prospect go and miss out on a great referral source.
If you’ve never done non-QM, here are some non-QM loan scenarios that can help you say“yes” to more prospects:
A self-employed borrower with a 714 credit score, 38% DTI and 64% LTV, who needs cash out.
The Sprout Solution:
Income can be verified with bank statements. Cash out transactions are not capped at a specific dollar amount, as long as the borrower stays within their LTV requirement. Someone with a 714 credit score has the ability to borrow up to a maximum of 75% to $2 million.
Primary residence purchase, 660 credit score and the borrower has 24 months of business bank statements with substantial reserves.
The Sprout Solution:
The minimum credit score is met with a 660 score. This loan can be approved up to 70-75% LTV, and a loan amount as high as $1.5 million.
A self-employed individual receives a draw from their business. The net income on their personal return shows only $40,000. Can draw income be used?
The Sprout Solution:
Yes. The borrower can show 12-24 months of bank statements, and depending on how much cash flow their business is generating, this can be added to the draw from their business.
Looking at these scenarios makes it easy to see how non-QM fills the gaps that exist in current agency products. Savvy forward-thinking brokers will benefit long-term by becoming comfortable working with non-QM now.
If you’re thinking, “I’m so busy with agency I don’t have time for non-QM,” think again. The prospects are there and so is the help you need to get started. As one of the nation’s leading non-QM lenders, Sprout Mortgage helps brokers say “yes” and make the most of every prospect. Sprout provides brokers with training webinars and resources, the best AUS technology designed for non-QM loan scenarios, a loan scenario desk, a bank statement review team, a proprietary program and pricing tool, personalized marketing materials, and much more.
Sprout will show you how easy it is to help borrowers with non-QM, which starts by taking the application like you would for an agency loan. Then, Sprout will help you find a program for your borrower. It’s that easy.
Once you become familiar with non-QM you’ll be prepared to say “yes” to more borrowers and your business will be more secure when rates go up. When you work with non-QM it’s easy to get used to saying “No W-2? No problem!”