Non-QM Loans

What makes a loan "Non-QM"?

A Qualified Mortgage (QM) meets specific guidelines set by the Consumer Financial Protection Bureau, including full income documentation via tax returns, a debt-to-income ratio at or below 43%, and standard amortization. A Non-QM loan falls outside one or more of these guidelines — for example, using bank statements instead of tax returns, allowing higher DTI ratios, or offering interest-only payment options.

Are Non-QM loans safe?

Yes. Non-QM loans are fully regulated mortgage products originated by licensed lenders. They are not the same as the subprime loans from the 2008 financial crisis. Modern Non-QM loans require documented ability to repay, maintain reasonable loan-to-value ratios, and follow strict compliance guidelines. They simply use alternative methods to verify that ability.

Who benefits most from a Non-QM loan?

Non-QM loans are ideal for self-employed borrowers, business owners, real estate investors, foreign nationals, retirees with significant assets but limited income, borrowers with recent credit events (bankruptcy, foreclosure, short sale), and anyone whose financial picture does not fit traditional documentation requirements.

What interest rates can I expect?

Non-QM loan rates are typically 1-3% higher than comparable conforming conventional loans. The exact rate depends on the specific Non-QM program, your credit score, down payment, and loan amount. While the rates are higher, these loans provide access to financing that would otherwise be unavailable through traditional channels.

What down payment is required for Non-QM loans?

Most Non-QM programs require a minimum down payment of 10-25%, depending on the specific program, loan amount, and credit profile. Bank statement loans may start at 10% down, while programs for borrowers with recent credit events may require 20-25%. A larger down payment generally means better rates and terms.