Non-QM Loans
Non-Qualified Mortgage (Non-QM) loans are designed for borrowers whose income, credit, or property doesn't fit the strict Qualified Mortgage rules — including investors, self-employed, foreign nationals, and recent credit-event borrowers.
At a glance
| Minimum down payment | 10%–25% depending on program |
|---|---|
| Minimum credit score | 620–680 depending on program (some asset-based programs accept 600) |
| Maximum loan amount | Up to $5M on some programs |
| Mortgage insurance | Varies — most Non-QM programs do not require it |
Best for
- Self-employed borrowers (bank statement loans)
- Real estate investors (DSCR loans)
- Foreign nationals buying U.S. property
- Asset-rich, income-light borrowers (asset depletion loans)
- Borrowers with recent bankruptcy or foreclosure (1-day-out programs)
- Buyers of unique properties that don't fit conventional guidelines
Eligibility requirements
- Varies dramatically by program — credit, income docs, and reserves all flexible
- Down payment typically 10%–25%
- Credit score floor of 600–680 depending on program
- Documented assets and ability to repay
- Property type and use determine specific eligibility
Pros
- Solves loan scenarios conventional and government programs can't touch
- Multiple income documentation options (bank statements, P&L only, asset depletion, DSCR)
- 1-day-out-of-bankruptcy and foreclosure programs available
- Foreign national programs without U.S. credit history
- Interest-only and 40-year terms available on some programs
Cons
- Higher interest rates than conventional and government loans
- Larger down payments usually required
- Prepayment penalties on some programs (especially DSCR)
- Fewer lenders — requires a broker with wholesale access
Documents you'll need
- Varies by program — see DSCR, Bank Statement, ITIN pages for specifics
- Always: photo ID, asset statements, property details
When Non-QM is the right tool
If you’re self-employed and writing off heavily, an investor scaling past 4 properties, a foreign national, or someone climbing out of a credit event, the QM rules are working against you. Non-QM is purpose-built for these scenarios.
The mindset shift is treating a Non-QM loan as a 2- to 3-year bridge, not a permanent mortgage. Buy now using Non-QM to capture the property and the appreciation; refinance into conventional when your file improves.
Frequently asked questions
- What does Non-QM actually mean?
- After the 2008 financial crisis, federal regulators created Qualified Mortgage (QM) rules — strict standards on income verification, DTI, and loan features. Non-QM loans are mortgages that don't meet QM rules but still follow Ability-to-Repay regulations. They're not subprime; they're an alternative documentation category.
- Are Non-QM loans risky?
- Non-QM loans require strong credit, meaningful down payments, and verified assets — they're not the loose lending of the pre-2008 era. The 'risk' is to the lender (they can't sell to Fannie/Freddie), which is reflected in the higher rate.
- How soon after a bankruptcy can I get a Non-QM loan?
- Some Non-QM programs allow financing as soon as 1 day after a bankruptcy or foreclosure discharge. Conventional and FHA require 2–4 years of seasoning.
- Will my Non-QM rate stay high forever?
- No. Most borrowers refinance into conventional or government financing once they qualify (typically 2–3 years out from the qualifying event). Non-QM is best thought of as a bridge.
Related loan programs
- Bank Statement Loans — Bank statement loans qualify self-employed borrowers using 12 or 24 months of business or personal bank statements instead of tax returns — perfect for owners whose tax returns understate true cash flow.
- DSCR Loans — DSCR (Debt Service Coverage Ratio) loans qualify real estate investors based on the rental income of the property — not personal income or tax returns. They're the go-to program for scaling a rental portfolio.
- ITIN Loans — ITIN loans let borrowers who file U.S. taxes with an Individual Taxpayer Identification Number — instead of a Social Security number — buy a home. They're a path to homeownership for non-citizen workers and entrepreneurs.