Finance
What is 'non-QM' (non-qualified mortgage) lending and when might a Hawaii buyer need it?
AA. A mortgage that fails federal lending standards and is illegal to originate
BB. A mortgage that doesn't meet standard Qualified Mortgage criteria (DTI, documentation, loan features); used for self-employed borrowers, investors, or those with non-traditional income✓ Correct
CC. A government program for buyers who have been denied conventional loans
DD. Any FHA or VA loan; they are not QM loans
Explanation
Non-QM loans are mortgage products that fall outside the Qualified Mortgage (QM) safe harbor but are still legal to originate. They serve borrowers who don't fit conventional documentation requirements: self-employed Hawaiians with complex income, real estate investors using rental income, borrowers with recent credit events, or those with high-value assets but irregular income (common in Hawaii's tourism and gig economy).
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Key Terms to Know
Debt-to-Income Ratio (DTI)
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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