Self-employed borrowers
Business owners who write off aggressively and show low adjusted gross income on tax returns despite strong deposits.
Co-flagship program
Non-QM Loans
Non-QM stands for Non-Qualified Mortgage. It is not subprime lending. These are creditworthy borrowers whose income structure does not fit inside the Qualified Mortgage documentation box.
Quick Answer
Non-QM loans are mortgages that fall outside the Qualified Mortgage rules, allowing lenders to document income and assets in ways conventional underwriting does not permit — bank statements, rental cash flow, assets, 1099s, or a profit-and-loss statement. They are underwritten to real repayment ability rather than to agency income formulas, which is why self-employed borrowers and investors often fit better here. Pricing, reserves, and down payment requirements are generally higher than agency financing and vary materially by program.
What Non-QM actually means
A Qualified Mortgage follows federal ability-to-repay documentation standards built around W-2s and tax returns. Non-QM loans still verify ability to repay — they simply do it with different documents: business bank statements, property cash flow, liquid assets, or a CPA-prepared profit and loss statement. Credit standards remain real; most Non-QM borrowers hold scores well above 660.
Who Non-QM serves
1099 and commission earners
Contractors and salespeople with variable income that conventional averaging penalizes.
Real estate investors
DSCR qualifying based on the subject property's rent, with no personal income documentation.
Recent credit events
Borrowers past a bankruptcy, short sale, or foreclosure who have not reached conventional seasoning periods.
Program overview
- Bank statement loans — 12 or 24 months of personal or business deposits
- DSCR loans — qualification from property rent, not personal income
- Asset depletion loans — qualifying income calculated from liquid assets
- P&L only loans — CPA or licensed tax preparer profit and loss statement
Rate and cost context
Non-QM rates typically run roughly 0.5% to 1.5% above comparable conventional pricing. That premium buys documentation flexibility and speed. Many borrowers use Non-QM to purchase now and refinance into conventional financing once two years of qualifying tax returns exist.
Frequently Asked Questions
No. Subprime lending was defined by weak credit and no documented ability to repay. Non-QM loans verify ability to repay with alternative documentation and are used mostly by creditworthy self-employed borrowers and investors.
Typically 0.5% to 1.5% above comparable conventional rates, depending on documentation type, credit score, down payment, and occupancy. DSCR investment pricing sits at the wider end of that range.
Most Non-QM programs start at 10% to 20% down for primary residences and 20% to 25% for investment properties. Stronger credit and reserves can reduce the requirement.
Yes, and many borrowers plan for it. Once you have the tax return history or credit seasoning that conventional underwriting requires, you can refinance into a conforming loan if the rate makes sense.
Owner-occupied Non-QM loans generally do not. Investment property loans, particularly DSCR, often include a prepayment penalty of one to five years, and buying it out raises the rate.