Since 2020, more homeowners and investors have turned to non-QM home lenders to help fund their purchases due to experiencing more non-traditional financial situations, economic instability, higher debt-to-income ratios, and more. Not surprisingly, that leap in the market may be experiencing a setback soon as lenders started to see higher delinquency rates toward the end of 2023.
According to market experts, 2023’s non-QM securities produced more delinquencies than the ones produced in 2022 for a few reasons. For one, interest rates rose rapidly in 2022, which caused more loans to originate as non-QM loans rather than prime mortgages.
For another, mortgage volume started to fall overall in the industry, which led to issuers to expand their credit boxes. As a result, this led to an even higher number of transactions backed by collateral that was weaker than in years past.
This weaker underwriting criterion peaked between the second and fourth quarters of 2022. When underwriting requirements are weaker, it often results in higher delinquency rates than when those requirements are more stringent. Many of the non-QM loans that were created in the later parts of 2022 were bundled into the pools that were securitized in 2023. In other words, those 2022 loans contributed to the higher delinquency rates of 2023.
Overall, the 30-day plus delinquency rate for non-QM options went up from 2.9% to 4% in the past three quarters. On average, non-QM loan offerings experience a delinquency rate that hovers around 2.8%. In contrast, traditional loan offerings in 2023 experienced a delinquency rate of only 1.6%.
The good news, however, is that most experts see this recent dip as a minor setback. Industry leaders believe that non-QM mortgage delinquency will “soften” throughout 2024.
Non-QM Loans: Are They A Good Option in 2024?
Not only do industry experts expect delinquencies to start to fall in the coming year, but they also expect more consumers to flock toward non-QM options. In fact, most mortgage sales experts are encouraging other lenders to start offering non-QM loans if they aren’t already. Broad mortgage market performance, according to most industry insiders, remains strong.
Are you considering taking out a home loan in 2024? If so, then here are a few reasons why you should consider going with a non-QM lender:
- You can still qualify even if you have a poor credit score
- You won’t have to provide extensive documentation
- You will still qualify even if you’re self-employed or have another non-traditional stream of income
- Funding is faster
- Loan amounts can go higher than with traditional loans
- Loan terms are more flexible, so they’re more likely to fit your needs
Are you ready to get started? Check out our loan requirements and offerings here at Non-QM Home Loans by using our interactive online menu, or feel free to reach out to an agent now at (800) 413-0240 for more details. Our team is prepared to help you identify your best options when it comes to funding your home.
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