The Lowdown on Non-QM Loans...
Flexible Mortgage Solutions for Non-Traditional Borrowers
Non-Qualified Mortgage (Non-QM) loans are alternative mortgage products designed for creditworthy borrowers who don’t fit traditional lending guidelines. These loans use common sense underwriting to evaluate your ability to repay based on your actual financial situation rather than rigid regulatory requirements that may not reflect the reality of your finances.
Non-QM loans are particularly beneficial for self-employed individuals, real estate investors, foreign nationals, and others with non-traditional income sources or unique credit situations. Whether you qualify using bank statements instead of tax returns, asset depletion, or property rental income, Non-QM financing provides pathways to homeownership and investment opportunities.
Our Non-QM specialists understand alternative documentation and will help you determine which Non-QM program best fits your financial profile, whether you’re self-employed, building an investment portfolio, or have unique income circumstances.
Key Benefits:
- Alternative income verification methods including bank statements and assets
- No limit on number of financed investment properties
- Flexible credit requirements and faster recovery from credit events
- Common sense underwriting focused on ability to repay
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The Non-QM Loan Process
Here’s how the Non-QM loan process works:
- Consult with a Non-QM specialist to determine which program fits your financial situation
- Gather alternative documentation based on your selected program type
- Submit application with appropriate income and asset verification
- Close on your home purchase or refinance with flexible underwriting
Common Questions About Non-QM Loans
Are Non-QM loans riskier than conventional loans?
Non-QM loans are different, not necessarily riskier. They’re thoroughly underwritten to verify ability to repay using alternative methods. The higher interest rates reflect increased flexibility and alternative documentation methods, not higher default risk. Many Non-QM borrowers are actually very creditworthy but don’t fit traditional documentation requirements.
Why are Non-QM interest rates higher?
Non-QM rates are typically 1-3% higher than conventional rates because these loans cannot be sold to Fannie Mae or Freddie Mac. Lenders hold them in portfolio or sell to private investors, which affects pricing. The flexibility in underwriting and alternative documentation also factor into rate pricing.
Can I refinance to a conventional loan later?
Yes. Many borrowers use Non-QM loans as a bridge solution. Once your financial situation changes—business is established longer, income becomes more traditional, or you’ve recovered from credit events—you can refinance to a conventional loan with more competitive rates.
What if I’m self-employed for less than 2 years?
Bank statement programs typically require 12-24 months of business history. If you have less, consider asset-based programs or demonstrating continuity in your field by showing similar work as a W-2 employee before becoming self-employed, which some lenders may accept.
Can I use a Non-QM loan for my primary residence?
Yes. Non-QM loans are available for primary residences, second homes, and investment properties. Program availability and specific terms vary by occupancy type and intended use of the property.
How soon after bankruptcy can I get a Non-QM loan?
Some Non-QM programs accept borrowers as soon as 12 months after bankruptcy discharge, compared to 2-4 years for conventional loans. Requirements typically include re-established credit, larger down payment (20-25%), substantial reserves, and demonstration of improved financial management and circumstances.
Your Non-QM Loan Could Be Fully Funded 30 Days From Now
Bank Statement Loans
Qualify using 12-24 months of bank statements instead of tax returns
Asset Qualifier Loans
Use liquid assets to demonstrate ability to repay without income documentation
DSCR Investment Loans
Qualify based on property rental income without personal income verification
Foreign National Programs
Purchase U.S. property without U.S. credit history or Social Security number
Interest-Only Options
Lower initial monthly payments with interest-only payment periods available
Credit Flexibility
More lenient credit requirements and faster recovery timelines after credit events
All loans subject to credit approval. Rates, program terms, and conditions are subject to change without notice. Not all products are available in all states or for all dollar amounts. Other restrictions and limitations may apply. This is not a commitment to lend. Non-QM loans are non-qualified mortgage products not eligible for purchase by Fannie Mae or Freddie Mac. Interest rates for Non-QM loans are typically higher than conventional loans. Property appraisal required.
Do I Qualify?
Non-QM loan qualification is more flexible than conventional loans but still maintains responsible lending standards. Requirements vary by program type—bank statement loans typically require 12-24 months of statements, credit scores of 620 or above, and 10-20% down payment. Asset qualifier loans require substantial liquid assets to demonstrate repayment ability. DSCR investment loans focus on property rental income rather than personal income. Most Non-QM programs require 6-12 months of cash reserves, property appraisal, and demonstration of ability to make monthly payments based on alternative documentation methods.
Non-QM loans serve borrowers who are creditworthy but don’t fit QM guidelines—self-employed individuals with strong cash flow but lower taxable income, investors with multiple properties, foreign nationals investing in U.S. real estate, or those recovering from credit events who have re-established financial stability.