MyMortgageRates is developed by Zeitro as a bridge for both non-QM loan borrowers and non-QM loan officers. If you're a borrower looking for top non-QM lenders, you're in the right place. Here are the best non-QM mortgage lenders in <city>.
What's more, if you're a wholesaler or retailer who wants to check non-QM loan guidelines quickly and accurately, Zeitro Scenario AI can improve your efficiency in workload and help increase 30% closed loans. To learn more about non-QM lending, take a look below.
What is a Non-QM Loan?
Non-qualified mortgage (non-QM) loans are alternative mortgage products that do not meet the Consumer Financial Protection Bureau's (CFPB) General Qualified Mortgage (QM) standards or agency/QM definitions. They exist to serve creditworthy borrowers who fall outside traditional underwriting boxes, for example, many self-employed borrowers, real-estate investors, foreign nationals, or people with non-standard documentation, by using alternative documentation and underwriting methods to demonstrate the ability to repay.
In 2024, non-QM originations expanded but remained a relatively small share of the total market; industry reporting based on CoreLogic data places non-QM at around 5% of total mortgage originations in 2024.
Unlike many conforming mortgages that rely primarily on W-2s, pay stubs, and tax returns, non-QM programs commonly accept alternative documentation such as bank-statement qualification, asset depletion schedules, DSCR (rental cash flow) analyses, or profit-and-loss statements. These loans are underwritten to demonstrate repayment ability through those alternative factors rather than only traditional tax-documented income.
What Property Types are Eligible for Non-QM Lending?
Non-QM financing is used for a wide range of property types:
- Owner-occupied single-family homes, condos, and multi-unit properties (1–4 units).
- Investment properties (including purchases financed under DSCR programs that qualify on rental cash flow).
- Second homes and vacation properties (program availability varies by investor).
- Foreign-national purchases (programs that accept foreign documentation and alternative credit).
- Some lenders will finance manufactured homes (if foundation and local standards are met) and other "nonstandard" or unique properties that conventional agency programs decline.
Mixed-use and certain rural properties can be eligible under specific non-QM lenders, but these require lender approval and often stricter credit/loan-to-value/reserve conditions.
Examples of Non-QM Products
- Bank-statement loans qualifying using 12 or 24 months of personal/business bank deposits.
- Asset-depletion loans use investment account balances or other liquid assets to impute an income stream.
- Interest-only loans lower initial payments for borrowers with specific cash-flow strategies.
- DSCR (Debt-Service Coverage Ratio) loans rental investor loans that qualify based on property cash flow rather than borrower W-2 income.
- Foreign-national programs allow purchase by international buyers without traditional U.S. credit files.
- Recent-credit-event programs products designed for borrowers recovering from bankruptcy, foreclosure or short sale with program-specific seasoning requirements.
Pros and Cons of Non-QM Loans
Pros
- Flexible documentation and underwriting are helpful for self-employed, gig-economy, or investor borrowers.
- Possibility to qualify where conventional/QM underwriting would decline.
- Product diversity (bank statement, DSCR, asset-based, interest-only) allows matching to borrower needs.
- Many non-QM programs emphasize higher credit scores and lower LTVs to mitigate risk.
Cons/Considerations
- Interest rate premium: non-QM loans typically carry higher interest rates than comparable QM/conventional products; the premium varies by program and market conditions in 2024 CoreLogic reported an average initial 30-year rate of 6.7% for non-QM vs. 6.4% for QM, and other sources show premiums that can range from several tenths up to roughly 1–2 percentage points depending on investor appetite and loan features.
- Down payment/LTV: requirements vary by program and occupancy. Primary-residence bank-statement programs can start around 10%, while investor/non-owner-occupied programs frequently require 15–30% (or more).
- Reserves: many non-QM programs require reserves; common program ranges are roughly 3–12 months of mortgage payments, with higher reserve needs for foreign nationals, investment properties or higher-risk profiles.
- Prepayment penalties & fees: some non-QM products (especially older vintages or certain investor-oriented deals) may include prepayment penalties or higher fees. This is not universal, but is more common than in agency conforming products.
- Limited lender availability/investor rules: not all lenders offer the same set of non-QM programs; product availability and pricing depend heavily on the investor pipelines and secondary-market demand.
How to Get a Non-QM Loan
- Find experienced non-QM lenders or mortgage brokers. Many non-QM programs are distributed through broker channels, wholesale lenders, or niche specialty lenders working with originators who close non-QM loans frequently, speeding up underwriting and clarifying documentation expectations.
- Match product to borrower facts. Identify whether bank-statement, DSCR, asset-depletion, or foreign-national product is the right fit, and then select lenders that specialize in that product.
- Assemble documentation early. Typical items include 12–24 months of bank statements (for bank-statement loans), asset statements and brokerage statements (for asset depletion), rental agreements and P&L (for investor/DSCR analysis), explanation letters for credit events, and substantial post-closing liquid assets where required.
- Use compensating factors. Large down payment, low LTV, strong credit score, meaningful reserves, and evidence of ongoing cash flow all strengthen a non-QM application.
- Read the loan docs carefully. Note any prepayment penalties, seasoning requirements, or investor-specific covenants that could affect future refinance or sale options.
What Are the Typical Qualification Requirements?
Qualification rules vary significantly by lender and program; below are typical ranges and common program features observed in the market:
- Credit score: many non-QM programs start around 620, with better pricing above 700. Industry data shows average non-QM borrower FICO ≈ 776 in 2024, reflecting that many non-QM borrowers have strong credit despite non-standard documentation.
- Debt-to-income (DTI): non-QM programs commonly allow higher DTIs than the General QM reference point (some programs will evaluate DTIs up to ~50% or higher, or rely on alternative metrics such as DSCR). That said, lenders still look for strong compensating factors.
- Down payment/LTV: typical owner-occupied non-QM may start around 10%, while investment property programs commonly require 15–30%+. LTV limits change with credit score, property type and program.
- Reserves: expect 3–12 months of reserves depending on program, occupancy and borrower profile.
- Appraisal/property eligibility: appraisals and property types are reviewed; some non-QM investors accept non-warrantable condos, mixed-use or short-term-rental properties but with investor restrictions.
- Income documentation: alternatives include bank-statements (12/24 months), profit & loss statements, asset depletion calculations, or proof of rental income for DSCR loans.
QM vs Non-QM: What is the Difference?
- Qualified Mortgages (QM) QM loans meet specific regulatory criteria that give lenders certain protections under the Ability-to-Repay (ATR) rules. The General QM definition has historically included a 43% DTI limit as a benchmark, but note there are multiple QM pathways (temporary GSE QM, small-creditor QM, etc.), and the CFPB has considered regulatory changes to the General QM definition (including price-based approaches). In short, QM status is a regulatory construct tied to specific underwriting and product rules.
- Non-QM loans do not meet the QM criteria (for one or more reasons) and therefore do not carry QM's automatic protections for lenders. That freedom allows lenders to underwrite with alternative documentation, accept interest-only features, higher DTIs in many cases, or other features that would disqualify a loan from being a QM. The trade-off is typically higher pricing, different seller/investor treatment, and potentially fewer consumer protections tied to QM status.
FAQs About Non-QM Mortgage Loans
Q1. What is non-QM lending?
Non-QM lending refers to mortgage origination outside the Qualified Mortgage frameworks set by the CFPB (and other agency/secondary market definitions). It includes loans that use alternative methods to assess repayment ability.
Q2. Is a non-QM loan a conventional loan?
Not necessarily. "Conventional" usually means loans conforming to Fannie Mae/Freddie Mac guidelines. Many non-QM loans are held in portfolio or sold to non-agency investors rather than the GSEs, so they are distinct from agency conventional loans.
Q3. Can you refinance a non-QM loan?
Yes. Borrowers can often refinance a non-QM loan into another non-QM product or into a QM/conventional product later, for example, after demonstrating payment history or improving documentation. Product availability and refinancing terms depend on the borrower's evolving profile and investor criteria.
Q4. Is a HELOC a non-QM loan?
A HELOC is an open-end line of credit, not a closed-end mortgage; the ATR/QM rule and corresponding QM/non-QM closed-end framework generally do not apply to HELOCs in the same way. That means HELOCs aren't categorized in the simple "QM vs non-QM" closed-end sense; be careful when discussing HELOCs as "non-QM."
Q5. What is non-QM underwriting?
Non-QM underwriting assesses repayment ability using alternative documentation and methods: bank-statement income calculation, asset depletion drivers, DSCR calculations for rentals, manual underwriting, and more. Experienced underwriters and processors are important because much of this work is manual and program-specific.
Q6. What credit score do you need for a non-QM loan?
Minimums vary by program; many lenders start around 620, while better pricing typically requires 700+. Industry averages for non-QM borrowers were relatively high (≈776 in 2024), reflecting that many non-QM borrowers are high-credit-score borrowers with nontraditional income documentation.
Q7. Can self-employed people get non-QM loans?
Yes, self-employed borrowers are core beneficiaries of many bank-statement and alternative documentation programs. Those programs allow qualification based on documented bank deposits or P&L statements rather than tax returns, which may understate cash flow due to deductions.