Increase in Demand for Non-QM Loans as Rates Rise

Back in 2019, the average mortgage rates for families hovered around 3.94%. As we enter into the last few months of 2023, that rate is right around 8% for traditional lenders.

With such high rates, demand for new mortgages has been decreasing. To make matters more complicated, an increasing number of interested borrowers can’t meet the qualifications that most lenders require in order to secure a mortgage with them. These qualifications usually include a significant income, a good credit score, not much debt, and a hefty down payment. As a result, traditional mortgage providers are struggling to find business and operate as usual.

This market problem is opening the door for non-traditional lenders who are currently offering non-QM mortgages for a comparable rate of around 9.25%.

Acra Lending, for instance, says that their sales are up 24% since July of 2023, and the group expects to fund an impressive 23% more loans than were funded in 2022. The CEO of the company explained that they are seeing more “mom-and-pop investors,” this year, which is also helping the company to have a lot of confidence in the housing market. Rather than seeing a decline in business, Acra has experienced growth.

So, what’s driving the market growth in the non-QM market? Market analysts suggest that about 50% of non-QM production right now is tied up in investor loans, which means that it’s not only families seeking out a forever home who are taking advantage of more flexible loan options. There’s currently a housing shortage of around 3-5 million homes in the U.S., and investors are using that fact to invest more money in the housing market with non-QM loans.

The current economy and volatility in the banking sector are also causing many banks and traditional lenders to tighten their qualifications even more so than in the past. Credit tightening has happened in the non-QM sectors as well, but it’s much more apparent in the traditional lending market right now. This is only furthering the push for more people to be driven towards non-QM lenders.

Would You Benefit from a Non-QM Loan?

Are you interested in taking out a new mortgage but can’t meet the requirements that traditional lenders want you to meet? If so, then working with a non-QM lender might be a great option for you! While rates are slightly higher than traditional mortgages, you can still obtain a mortgage even if you are:

• Self-employed
• Have an inconsistent income stream
• Struggle with credit issues
• A foreign national
• You don’t have a Social Security number

In general, non-QM loans work best for individuals who need more flexibility when it comes to lending terms, but it’s also a great option for business owners, too. This is especially true if you’re looking to invest in a second home or an investment property.

If you’re interested in learning more, then check out our loan requirements to get more details about what we offer.