The world of home loans is a wide one. Choosing the right kind can go a long way toward making for a great deal that works well for you.
If you’re a non-traditional borrower with irregular income, such as a small business owner or independent contractor, understanding your options in the world of mortgage loans is an important first step toward qualifying.
You may have heard of our Community Development Loans (CDLs). Maybe you have questions about how they work, who they’re for, and what makes them different from conventional mortgages.
How do conventional mortgage loans work?
Conventional mortgages are one of the most common types of mortgage loans on the market. Unlike FHA loans or VA loans, conventional mortgage loans are not insured or guaranteed by a government agency. All of these loan types, however,are offered directly to consumers through private lenders like banks and credit unions.
Because lenders offering conventional mortgages don’t have government insurance to fall back on, and due to government regulations around mortgages put in place after the housing bubble in 2008, conventional loans have fairly stringent qualification requirements. For instance, your credit score will likely need to be at least 620 for most lenders offering conventional loans, as opposed to a minimum of just 500 for loans backed by the Federal Housing Administration (FHA).
Additionally, you may need to provide a higher down payment than you would with a government-backed loan. The conventional wisdom is that you’ll need 20% of the sale price, although this rule of thumb isn’t always a hard and fast one. It’s possible to find conventional loans with down payment minimums as low as 5%.
Most importantly, for non-traditional borrowers, conventional loans require a significant amount of income documentation. This includes tax returns, bank statements, and more. They tend to work out best for people employed at a conventional job which provides a W-2, and who make a steady, predictable paycheck.
How is a Community Development Loan (CDL) different?
But the world is changing. The pool of us who fall into that “conventional job” category is shrinking. These days,with the freedom of remote work and the emphasis on life satisfaction, more people are making their income out of one or even multiple independent contracting gigs, or striking out to take up small business ventures. There’s been a great evolution in how people live and work. That means banks need to evolve to work with would-be home-buyers as they strive to qualify for a mortgage with irregular income. That’s part of Quontic’s mission.
Enter the Community Development Loan (CDL), which was specifically designed with non-traditional borrowers in mind. In exchange for a higher minimum down payment (20% or 30%, depending on the total loan program requested) and minimum credit score (660), a Community Development Loan offers borrowers in good financial standing the opportunity to qualify for a mortgage, even if their paperwork doesn’t quite line up in the “conventional” sense. Our income verification process is much friendlier to self-employed borrowers, small business owners, foreign nationals, and anyone whose money doesn’t come in the form of a biweekly paycheck. We accept flexible income documentation (no personal tax returns or W-2s are required for loan approval) and 100% gift funds for down payments, closing costs, etc. Plus, we offer loans of up to $3,000,000 to qualified borrowers.
How can I apply for a Community Development Loan?
If a Community Development Loan sounds right for you, you can start the application process easily from the comfort of your own home! Start by speaking to one of our mortgage specialists to determine whether it’s a right fit for your financial needs. Quontic also offers a wide range of other mortgage products, including conventional loans as well as FHA- and VA-backed loans for those who qualify.
Our team of knowledgeable, helpful representatives is standing by to help you find the perfect loan for your homeownership adventure. (And if you’re not in the market for a mortgage at the moment, our range of checking and savings accounts are pretty innovative, too!).
Quontic Bank is not affiliated with or acting on behalf of or at the direction of Federal Housing Authority (FHA) or any government agency or government sponsored entity. All lending products are subject to approval. Rates, program terms & conditions are subject to change without notice. Not all products are available in all states or for all amounts. This does not represent an offer to enter into a loan agreement. Other requirements, restrictions & limitations apply. Information is accurate as of August 23, 2022 and is subject to change without notice.