Finance
What is a 'Non-QM loan' (Non-Qualified Mortgage) and when might it benefit Illinois borrowers?
AA loan that doesn't qualify for government backing; always higher risk than conventional
BA mortgage that doesn't meet the CFPB's Qualified Mortgage standards but may serve borrowers with non-traditional income documentation, recent credit events, or investment properties✓ Correct
CA loan for non-qualified properties like vacant land or mobile homes
DA federal program for borrowers who don't qualify for Illinois state programs
Explanation
Non-QM loans don't meet the Consumer Financial Protection Bureau's Qualified Mortgage (QM) standards (which require full income documentation, DTI limits, and no risky features). Non-QM loans may use bank statement income verification for self-employed borrowers, DSCR for investors, or allow higher DTI ratios.
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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.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
Math Concepts
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