According to Emerson, these rates can run as high as four and a half points higher than standard QM loan rates. This is due to the additional risk associated with non-QM loans, since they have more relaxed lending standards than traditional QM loans.
Non-QM loans provide homeowners with more flexibility in terms of loan types, repayment plans, and credit score requirements. They are often used by borrowers who cannot qualify for conventional QM loans due to their credit history or other factors. As such, these loans pose increased risks to lenders, which is why they typically have higher rates.
Emerson also noted that the gap between non-QM and QM rates is continuing to widen, as lenders become increasingly cautious when it comes to these types of loans. He believes that this could lead to fewer people being able to afford these loans, as the rates make them unaffordable for many borrowers.
In addition, Emerson spoke about the recent trend of banks offering special programs like “non-qualified mortgage banks.” These programs are designed to help borrowers find affordable mortgage rates despite not meeting conventional QM standards. However, Emerson noted that these programs are still quite expensive compared to regular QM loans, although the rates are coming down.
The bottom line is that non-QM loans are becoming increasingly expensive due to their higher rate of risk to lenders. Borrowers interested in taking out a non-QM loan should be aware of the higher costs associated with these loans, and they should also look into any special loan programs that may be available to them.
The recent report from Quicken Loans CEO Bill Emerson has highlighted the fact that non-Qualified Mortgage (QM) loans come with significantly higher rates than their traditional QM counterparts. This is due to the nature of these loans, which have relaxed lending standards that make them more risky for lenders. Rates on these loans can be as high as four and a half points higher than standard QM loans, making them unaffordable for many potential borrowers. Banks have sought to mitigate this issue by providing special programs such as “non-qualified mortgage banks” to help borrowers find an affordable loan despite not meeting conventional QM standards. However, these programs are still far more expensive than traditional QM loans, and the gap between the two is only widening. As such, non-QM loan borrowers should be aware of the higher costs associated with these loans, and they should also explore any specialty loan programs that may be available to them.
This article was contributed on Nov 25, 2023