Newfi introduces graduated payment non-QM product

Newfi Lending introduced a non-qualified mortgage product that has a graduated payment schedule over the first five years of the 30-year term of the loan.

The Pinnacles Step-Up Mortgage is available in Newfi’s wholesale and consumer direct channels. Besides one- and two-year bank statement options, Newfi also can underwrite these on a fully documented basis. Currently, it is offered to borrowers in Arizona, California, Florida and Texas.

“Innovation is key to finding success in changing market environments,” Steve Abreu, Newfi CEO said in a press release. “This cutting-edge solution will present our non-QM borrowers with another choice when financing their homes.”

Payments start at a lower base level and then increase annually at a 5% rate until the beginning of the sixth year. At that point, the borrower’s payments level out based on the remaining unpaid principal balance. The missed interest payments get rolled into the principal.

However, Newfi is qualifying the borrowers on the size of the highest monthly payment throughout the life of the loan. It is also providing the full 25-year amortization schedule for the fixed-rate option, so that no surprises arise for the borrower when their payments increase over time.

These loans are available up to $1.5 million, on primary residences only. Loan-to-value ratios top out at 75%, with Newfi willing to lend to borrowers with credit scores as low as 660.

“This is a solution that the everyday homeowners we work with have been asking for to ease the pressure of higher mortgage rates on their wallets,” said Dan Bayer, Newfi’s senior vice president of non-QM development and strategy.

In 2019, the company came out with a 2-1 Buydown program that provided seller concessions to borrowers to lower monthly payments for the first two years of the mortgage.