How Real Estate Investors Still Qualify for Mortgages Using Non-QM Lending Strategies

Coach Clarence (00:00)
Yeah, I tell people like I’m your attorney, right? You can tell me everything bad. We’re going to present your case in the best light to the underwriter. So you might say, well, God, I’ve only been on this job for 10 months. You know, I’m not at the 24 month thing, you know, or I just decided to be cool and I started doing ride share on the side. Now I got this income and then we got to ask questions.

Cody Crabb (01:54)
Welcome back to the Real Estate Pros podcast. I’m Cody Crabb with Investor Fuel. And today we are talking to Clarence Ferguson from Cross Country Mortgage out in Phoenix. Clarence works directly with real estate investors, flippers, wholesalers, helping them get deals funded, especially in the situations where income isn’t quite as clean or traditional as they would like. So he’s been doing this for over 10 years and we’re going to get into non-QM lending, borrower quality, and what investors need to understand before they go chasing

whatever random deal. Clarence, so nice to meet you today and we appreciate you joining us.

Coach Clarence (02:29)
Nice to meet you as well. Thank you for having me on your show.

Cody Crabb (02:32)
⁓ Yeah, of course. just just to start out, know, as I always say it seems like Real estate is not one of those things that’s written on ⁓ every kid’s like I want to be this someday type type list ⁓ So out of curiosity and you you also mentioned to me that you used to be a personal trainer So I’m like this is I don’t know what this path is gonna be but it’s not a straight line That’s for sure. It’s for certain So can you give us a little bit of like an intro into how you got into real estate and and what path brought you here?

Coach Clarence (02:44)
Yeah.

That is good.

True.

Well, yeah, I definitely didn’t dream of being a loan officer or doing anything with mortgages. But I was a personal trainer for many years and I was doing loans part time. You know, I’d get a loan as a referral and I was working at a broker shop and I just turned them in, they closed them for me. And I kept doing that for many, many years. Then I completely got out of the business in 2008, everything that was going on with that crazy time. Yeah. A little something happened.

Cody Crabb (03:25)
Did something happen in 2008? No, I’m just kidding. Yeah, Comes up often on this podcast,

Coach Clarence (03:32)
⁓ So then I just kept training, doing my personal training business. That’s the Coach Clarence there, everybody calls me Coach Clarence. So ⁓ back around 2019, I started getting the itch. I kept getting referrals and I was paying other guys and they were closing them. And I’m like, man, I should just start doing this again. So I had to go get re-licensed and start the whole thing all over. And then ⁓ I really actually went full time in 2026.

Cody Crabb (03:59)
Hmm,

Coach Clarence (03:59)
I was kind of phasing out his money business. Yeah. ⁓

Cody Crabb (03:59)
gotcha. So it’s relatively in a shift right now. Yeah. Gotcha. Okay. So, so what does it look like today? Like who are you typically working with? You know, what, what are you, what’s your day to day look like right now?

Coach Clarence (04:13)
We’re seeing in Arizona a lot of self-employed people, especially with the economy. People are getting gig, side jobs. The gig economy is really grown, so that complexes their finances and the underwriting. So we’re jumping a lot into non-QM, which is out of the box finances, not your straight W-2 people who have, you know, eight years on the job, you know, eight years of W-2. We get people who have a couple of years of W-2 and now they got a 1099. So now we got a

Cody Crabb (04:19)
Mmm.

Coach Clarence (04:43)
or sometimes they make a ton of money and write it off so we gotta use bank staves and that’s where the whole non QM comes in and we’re really good at that.

Cody Crabb (04:49)
Yeah,

so just for someone ⁓ that is listening and is not super aware of the terminology, not gonna raise my hand, but let’s just say it’s somebody that’s not me. So is non-QM lending just when it’s not a typical straightforward situation? Is it just kind of an irregular situation?

Coach Clarence (05:57)
Yeah, it’s actually called non-qualified mortgage or traditional mortgages.

straight up like I said you got your W-2s, you got two years on the job, you got two years of residence, anything that’s just a lot of times we just call them Pennella loans they just go right through right so a non-QM or non-qualified mortgage there’s something weird maybe it’s a huge loan amount maybe there’s multiple types of income that you got to factor in sometimes it’s stated income like in the old days called stated income where we’re using like 1099 we’re using

P &L statements, stuff like that. Anything that takes it outside the norm is considered non-human.

Cody Crabb (06:38)
Okay,

so ⁓ that’s, ⁓ I find this pretty interesting because ⁓ you called it a game changer. Was that a game changer for you and your business or is that a game changer in some other way?

Coach Clarence (06:46)
Absolutely.

Both, because a lot of times if you don’t know how to write those loans or originate those loans, you end up turning them down or you make a mistake and they fall out of underhand, which I’ve done all of the above. I’m not gonna sit here acting like I was the greatest thing, because I’m not. But.

You get really good at finding solutions. A lot of times we’re the cleanup guys. Like I was telling you earlier, we saved a guy on a jumbo deal. He had what we call a credit event. Something happened with his credit and it dropped his score down to a 602, which is obviously not ⁓ conventional financing, which would be a conventional mortgage, but we were able to do him and we did what we call a income qualifier from his assets. So we took some assets and we divided it by three.

and I got him the extra income and then the lender we used allowed you to go down to a 600 so we were able to save his purchase.

Cody Crabb (07:46)
Interesting. So what I’m hearing is if you’re like I should totally be able to afford a mortgage and A bank is like I don’t think so ⁓ Maybe that maybe this is the route to go to kind of show like look I actually can do this ⁓ and you have to kind of Prove it in a different way. So is it my kind of am I in the right ballpark?

Coach Clarence (08:07)
Yeah, I tell people like I’m your attorney, right? You can tell me everything bad. We’re going to present your case in the best light to the underwriter. So you might say, well, God, I’ve only been on this job for 10 months. You know, I’m not at the 24 month thing, you know, or I just decided to be cool and I started doing ride share on the side. Now I got this income and then we got to ask

How long you been doing it? How are you getting paid? Well, I got 10. I got bank statements. OK, so it really starts to open up other avenues.

to just say no because a lot of times you go to the bank and you say all that stuff and they go yeah we can’t help you so we get those. It is a game changer because it opens up possibilities especially with investors because their income a lot of times is tricky sometimes they get paid in cash you know sometimes they’re not really getting traditional pay stuff so the non-cune really opens those doors up for a lot of people who traditionally wouldn’t be qualified.

Cody Crabb (08:42)
Yeah, exactly.

So now, ⁓ what types of lenders can actually do this? Is this any lender can do it, they just won’t? Or is this like, you have to be specialized to do this?

Coach Clarence (09:12)
What?

Each lender when they decide how they’re going to lend, they decide what type of borrowers they want to deal with. Some lenders are like, we only want 700 FICO, I’m just making up a number, but 700 FICO, got to be clean two years, we don’t want any of messy stuff. Some lenders are like, we want to get creative and open our portfolio, we want to do self-employed, we want to do first-time home buyers, we want to do down payment assistance. So all those things open up. So there are a lot of lenders who do non-traditional lending and just who you partner with. ⁓

division that does non-traditional lending. So we’re getting trained every week. We are learning different things. I even will go in and go, wow, I didn’t know that.

Sometimes I’ll get a weird scenario and I’ll have to go work on like I have the gentleman today. He’s young. He wants to start investing and we’re going to put together something for him so he can start investing. There are a lot of people who want to invest because they watch stuff on TV and they go, man, you should have rental properties

and they don’t know how to do it. You know, so we got people who use Airbnb income. So it’s crazy. And it’s like for me, I go in every day and I’m like, wow, I’m learning on the job sometimes. Like I learned something new for some more experienced guys.

guys who all they do is investors. That’s all they want to invest with. You know, so I get to the room and hear the scenarios.

Cody Crabb (10:58)
Hmm. So.

Yeah, so just out of curiosity, is this just because, are these non-QM loans, is this mostly when people just don’t know what their options are? It seems like more people would take advantage of this if they knew that this was an option, because I think a lot of people end up in a situation where it’s like, well, I know I can afford it, just on paper it looks like I can’t afford it. This sounds like a situation for that, right? So is the reason people don’t do this just because they don’t really know it exists, or because, what is that?

Coach Clarence (11:27)
Yes.

It’s the same thing as 20 % down. How many years? Think about it. I don’t know how old you are, Cody, but for years we were taught put 20 % down, put 20 % down. That’s the only way to do it.

Cody Crabb (11:40)
Yeah, it’s what I heard until

I looked at 20 % and was like, are you sure? That’s,

Coach Clarence (11:45)
Yeah, I mean people have 20 % down, it’s a different world. But

you can put zero down, 3.5%. So it’s the same thing, the same thing as down payment. People just don’t know. So they’ll look at their stuff, especially self-employed guy, because they know what they’re right off. We get their tax returns, we’re like, okay. But, you know, they were like, hey, we see this guy’s bank statements and this guy is depositing the money. He’s got a good credit score, so he’s paying his bills. So let’s provide a solution for him. Now, you’re not going to get the fancy pricing you see on TV, your rates going to be high.

all about risk, right? Your interest rate, I just did a reel on Instagram about this. Your rate is based on the risk inherent with the loan. So if you do a bank statement, you got to put in, you got to put a little bit of your own money in there, 15, 20 % depending on the program, and your rate’s going to be a little higher because basically the bank is saying, we’re trusting you. Even though we see this money coming in, you might give me a statement and take all that money out and go do something else. So there’s a higher rate there. But if you explain that to people and the numbers make sense, it’s

education. That’s the biggest thing about it. You have to be an advisor. That’s why we call ourselves advisors, not loan officers. We’re not just calling you go, hey I work here. I’m go, put you in this box. Tell me what your goals are. What are your financial plans? So that’s kind of how our team works.

Cody Crabb (13:00)
I

find that really interesting. ⁓ So is this ⁓ like calling out people that are like, hey, you should try to look into this even if you think you can’t afford it? Or is this more like, I know I can afford it, I just know that it doesn’t look like I can afford it.

Coach Clarence (13:16)
I’d say both. If investing or buying a home is what you want to do, see what your options are. You can always get a game plan. Let’s say you just don’t qualify right now, even with all the great products out. Sometimes people just aren’t there yet, but they leave with a plan. Like, let’s get your score up to here. Let’s do this. I want you to finance yourself this. We don’t give tax advice, but we suggest, okay, you’re writing off every year. The banks want to see something if you’re going to use your tax returns. Like I have a young lady, she’s a doctor.

Cody Crabb (13:17)
Interesting.

Coach Clarence (13:52)
I So I had an interview, she never heard of the bank statement. you make, I saw her bank statements, I’m like, you qualify on your bank statements. I go, you gotta put 15 to 20 % down. So she’s like, well, what’s my options? I go, well, you can file your taxes directly and show more income. So it’s those conversations, you know, that people don’t know. A lot of times they don’t know, they’ll come in the door and go.

Cody Crabb (14:07)
Yeah.

Yeah.

Coach Clarence (14:16)
Well, I’ve been on the job and then I’m doing some uber because I need extra money Can I use that and that’s how those conversations open up?

Cody Crabb (14:23)
Interesting, okay.

So what do you see, you probably see pretty much any situation come across your desk based on what you’ve told me here. So is there something that you hear all the time that’s just flat out wrong? Like that you hear and it’s like people believe that but that is not true.

Coach Clarence (14:39)
I think one of the big ones, is funny to me, because I have people with 800 FICOs and they’ll be like, I don’t want to get my credit pulled because it’s going to lower my score.

And it’s like there’s this window of time depending on who you ask it might be 30 days it might be 45 days but there’s codes like we have a code as as cross-country right so when we post someone’s credit the credit bureaus know that this is a mortgage pool and there might be others after this so they give you a window of time it doesn’t really affect your score the higher your score the less likely as now if you have a lower FICO

a soft pool that should give enough a good idea soft pool means we’re just gonna pull one or two bureaus and we better get a pitcher and that’s one of the biggest things i hear and it’s like crazy like

Because other industries will mess your credit up because if you go to a car dealership, they’ll take your credit report and then they’ll send it to somebody else and then they’ll pull it. You’ll see like 10 different pulls and it’s like, what the heck? So that’s one of the biggest things I hear now. And the same thing with the down payment. I have to save up for a down payment. No, don’t.

Cody Crabb (16:19)
Or maybe you do, just not nearly as long as you thought you might have to. Yeah, okay.

Coach Clarence (16:22)
Right? Down payment

is this which is, I mean, it’s done through convention on government financing, but it is considered non-traditional. Someone’s giving you your down payment. Pretty cool, you know?

Cody Crabb (16:35)
Yeah, that’s interesting.

okay. So what should someone see in their finances if they’re an ideal person to look into this? Is this like I have multiple strings of income, I’ve got, you mentioned a couple of these things. I’m just curious if there’s any other sort of weird situations that would be like ideally you should look into this.

Coach Clarence (16:59)
I would say.

The first thing you want to ask yourself is, this income consistent? Underwriters always want to know, this consistent? Is there a history of this income? Okay, that’s the first thing. let’s say, cause a lot of times people will say, hey, I get $500 extra for overtime. Then my first question is how long have you been getting it? Because the underwriters want to go back and see. You might be getting it now, but if there’s no history of it, we really can’t use it. Okay. And then you also want to go, how am I getting this income?

people I had a lady try to do a refinance she’s got three roommates she’s like well they pay me for their rooms well how are they paying well they just give me money cash you know sometimes they sell me that’s too hairy you need consistency so but sometimes that can work there’s different you can you can use border income but again it’s the history of it so if you begin bored they call it border income if you begin border income for the last two years and you can prove it’s going to my account every month you see this from so and so so and so also people now get

Cody Crabb (17:44)
Yeah.

Coach Clarence (18:02)
paid from Zelle, Cash App, all these things are what, when you might go, maybe I should be looking at a different type of loan scenario. So you’re well, I just can’t buy it because I get my income from Zelle. I mean, listen, I don’t know what kind of audience you have, but I’ve done exotic dancers, I’ll use that term, in their cash base. But guess what? They’re putting that money in their accounts.

Cody Crabb (18:20)
Yeah.

Yeah, money’s money. Like you said, I think it’s more just about ⁓ being able to prove it. That’s kind of the line it sounds like. If you maybe feel like it’s not going to be the easiest situation to prove, then this would …

Coach Clarence (18:32)
prove it.

Yeah.

A friend

of mine, Sean Cahan, he’s called the mortgage geek. He told me a word that I’ve never forgot. It’s big in mortgages, it’s ATR, the ability to repay. That factors more than your credit, believe it or not. Because they’ll take a person with a lower credit score because of history. Right, ability to repay, ATR.

Cody Crabb (18:51)
⁓ yeah, yeah.

It makes sense, because who cares what your credit is if you can pay it back, yeah.

Yeah, yeah, that’s a really good point. ⁓ So, okay, ⁓ as things are growing for you in your business right now, is there anything that you’re expanding into or wanting to offer, like maybe expand to new locations or something like that? Or is this, ⁓ are you kind of like, yep, we’re small town firm and we like it this way? Or how does it work?

Coach Clarence (19:24)
Although we can

land in 50 states and I am really branching out and doing a lot of more reverse mortgages because that provides incomes for ⁓ older people. Yeah, over 62.

Cody Crabb (19:30)
interesting. Tell me.

Give us a

quick super quick. know man I’ve seen him on the infomercials and stuff but ⁓ if you just give me a super quick, ⁓ on reverse mortgages for people that are are listening to this

Coach Clarence (19:44)
Okay, so let’s say you have a home, I’ll use simple math, it’s 100 grand, you owe it free and clear. You can take a percentage of that equity and have it either paid out to you at once or paid out every month as income. And you don’t have to pay it back as long as you’re alive and living in the home. And I’m giving you a really high level of not getting into all the weeds. ⁓ Or you can sell that property, take that income, and we call it a reverse purchase, take that money, put it on a new smaller place.

Cody Crabb (20:02)
Yeah.

Coach Clarence (20:15)
one of your spouse’s spouse passed away or your partner passed away now you don’t need that big house so let’s sell that house put it into a new house now you have a mortgage free and clear you’re only paying your taxes and your insurance that kind of thing so that’s what a reverse money is basically it’s the money comes to you and you can use it as a absolute payout or you can make payments so that’s what the reverse money is. Simple as that.

Cody Crabb (20:26)
Hmm.

So, yeah, okay. So my question is,

is there a way that an investor can take advantage of a reverse mortgage, or is this not for them?

Coach Clarence (20:44)
If they meet the age criteria 62 and up, have never really seen, usually it’s only on one property. can’t like use a reverse mortgage on more than one property. At least not to my knowledge, maybe somebody’s listening, may tag you and say, he’s lying, I got this product, which we haven’t seen it yet, because that would be awesome.

Cody Crabb (20:48)
You

Well yeah, that’s true, because you have to live, don’t you have to live in it too? Yeah, so…

Yeah, good to know, good to know. I was just curious, because our listeners are all ⁓ real estate investors. So I was like, we should probably just say, is this a thing that they could use? And if it’s not, let’s just say that.

Coach Clarence (21:17)
A real

estate investor, man, that’s great for them to link up with somebody who does reverse mortgages because that opens up cash flow. And the person who go, like let’s say they have a investment property that’s been sitting in is perfect for an older couple. And that couple are like, wow, we don’t want to take on a new mortgage. Well, let’s do a reverse, get you that cash, buy the smaller property. Now that investor just sold that place. So it’s all collaboration. Sometimes it works, sometimes it doesn’t.

Cody Crabb (21:26)
True.

Yeah, that’s a good point.

Yeah, and think

it’s important to call out the connection with you is what would make that, you know what I mean? Just having the people in your network and things, knowing as real estate investors, think having a network that kind of has these different abilities and focuses and stuff is gonna make a huge difference just because of that. ⁓ All right, so as far as, ⁓ we’re kind of running out of time here, so just to kind of finish this out here.

If people want to work with you, you said you lend in all 50 states, is that right? So if people want to work with you, if they want to get in touch with you, ask you questions, where can they find you online?

Coach Clarence (22:18)
That’s correct.

It’s just my first and last name.com. So ClarenceFerguson.com pulled me right up. You can email me at [email protected]. And yeah, and I have a podcast called I Heard That. We put out a show every week and my YouTube channel is Coach Clarence TV. And so we do the visual portion of the podcast and I have guests on, kind of like what you do. We talk all the money stuff.

Cody Crabb (22:49)
Gotcha, cool. And what kind of stuff do you talk about?

What kind of stuff do you talk about on the podcast?

Coach Clarence (22:55)
Yeah.

Same thing, finances, mindset and fitness. I kind of bring some of my fitness stuff. Sometimes I have like a fitness expert on. We’ll have a guy who does investments. We’ll have a guy who does insurance. Like I’m interviewing an insurance guy coming up here. I’m going to interview a financial advisor. Just different things, ways for people to invest. I’ve had real estate investors on and they talk about their properties and what they like to do. So it’s really cool. And it’s just, like I told you in the beginning, it was about people over 40, because that’s generally when people start going, hey, let’s find what

Cody Crabb (23:21)
Alright, yeah.

Coach Clarence (23:27)
to invest money.

Cody Crabb (23:28)
Yeah,

totally, okay, yeah, that sounds like a good time. So check out his podcast. We’ll link to that for you in our notes here. But thank you so much for joining us today. You’ve given us a lot of good info here. And listeners, if you liked what you heard and you learned something, I know you did, go ahead and hit subscribe and follow us so you can get more episodes like this. Until then, we’ll see you on the next episode of Real Estate Pros. Take care.

Coach Clarence (23:37)
Okay.

Thank you.