5/1 ARM at 7.0% – No Income Required!

    We have an adjustable-rate mortgage at 7.0% – which is a decent rate in today’s environment. BUT, what makes that an astoundingly awesome rate is the fact that the loan requires NO INCOME verification at all – if the buyer has a 40% down payment. So, this is probably the best loan available for cash-heavy buyers who either can’t verify income or don’t want to go through the hassle of verifying income.

    And no, this is not a return to the crazy pre-2008 subprime days, as those “no-income- verification-loans” required NO down payments. Loans with large down payments have very low default rates, irrespective of verified income.

    Non-QM Loans

    I am blogging about Non-QM and other unusual loan products again because a borrower came to us recently after being told by a commercial bank that there were no mortgage options for him because he lacked the required income verification – when the borrower in fact qualified for several viable non-QM loans, one of which he readily and happily accepted.

    So, this is just another reminder that the non-QM space continues to expand and that borrowers should not give up if they have a decent down payment (20% or more) and a bank turns them down.

    Once again, Non-QM simply means Non-Qualified Mortgage – referring to loans that fall outside of the regulatory protections of “Qualified Mortgages” like conforming, FHA, VA, and most jumbo loans.

    Here is a quick list of loans that commercial banks don’t offer or don’t do well. This list is particularly important for borrowers who are unable to verify income in the traditional manner via tax returns and W2s.

    No-Income-Verification Loans

    This is the loan described at the top of the blog.

    CDFI Loans

    CDFI stands for Community Development Financial Institution, and these are another form of “no-income-verification loans.” These loans, however, only require 20% down! The rates and fees though are much higher than the loan described at the top of the blog. These loans have proven to be quite popular for us, despite the high rates, simply because the down payment requirement is less.

    Ability To Repay or ATR Loans

    These loans too have amazingly attractive interest rates and require no income verification as well. They also only require 25% down. But they require sufficient liquid assets to cover the entire loan balance and six months of housing payments after the loan closes.

    Hard Money Loans

    These are similar to No-Income-Verification Loans, as they focus only on equity, but they have much higher rates and fees than the Non-QM no-income-verification loans we offer. For some borrowers with credit or property condition issues, a hard money loan is the only option. And, we have dozens of hard money sources in every state in which we operate.

    DSCR Loans

    DSCR stands for Debt Service Coverage Ratio loans and are for investors only. If the market rent exceeds the total housing payment, buyers can get a loan with only 20% down – with NO other income verification required. If rent is less than the housing payment, buyers can still get financing but only with 30% to 35% down.

    Bank Statement Loans

    Bank Statement Loans are where we average the total deposits on recent bank statements (3 months, 12 months, or 24 months, depending on what is optimal) to qualify a borrower. We have a borrower now in fact whose business consistently generates $25,000 per month in cash flow, but who shows almost no income on his tax returns – making this option perfect for him. The rates for these loans are only marginally higher than Fannie Mae rates now too.

    100% Financing

    Yes, 100% financing is back, but these loans require full income documentation, and the rates are high. But, if borrowers have no other options and very limited cash, this is the loan for them.

    Renovation Loans for “Fixers”

    Fannie Mae, Freddie Mac, and FHA all offer renovation loans, with low down payment requirements, that effectively finance substantial repairs and improvements to properties – and these are great for “fixers.” Borrowers do need to verify income though and they need to occupy the property. These loans are not for investors. Most commercial banks do not offer these loans.


    Some banks do not offer FHA loans for reasons I don’t understand, and the ones that do are simply not very competitive or skilled with them. So, I thought I’d add this to the list too.

    If you or someone you know has questions about qualifying for a non-QM loan, feel free to reach out to our team of mortgage and non-QM experts! JVM’s Mortgage Analysts are available 7 days a week to help guide clients through the mortgage process. 

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