Understanding NON-QM Mortgages
NON-QM (Non-Qualified Mortgage) loans are residential mortgages designed for borrowers who don't fit the traditional "qualified mortgage" criteria set by the Consumer Financial Protection Bureau (CFPB). These loans provide flexible underwriting guidelines for self-employed individuals, real estate investors, and borrowers with unique financial situations.
Who Needs a NON-QM Loan?
NON-QM mortgages are ideal for:
- Self-employed borrowers who can't provide traditional W-2 income documentation
- Real estate investors seeking DSCR (Debt Service Coverage Ratio) loans based on rental income
- Foreign nationals purchasing US property without a Social Security Number
- Retirees using asset depletion to qualify based on liquid assets
- Borrowers with recent credit events like foreclosure or bankruptcy
Key Differences from Conventional Mortgages
Unlike conventional loans, NON-QM mortgages offer:
- Alternative income documentation (bank statements, 1099s, asset depletion)
- More flexible debt-to-income (DTI) ratios, often up to 50%
- No requirement for tax returns in many programs
- Loan amounts from $100,000 to $5 million+
- Interest-only payment options available
Common NON-QM Loan Types
1. Bank Statement Loans
Qualify using 12 or 24 months of personal or business bank statements instead of tax returns. Ideal for self-employed borrowers with significant write-offs.
2. DSCR Loans
Investment property loans based on the property's rental income, not your personal income. No income verification required.
3. Asset Depletion Loans
Use your liquid assets (stocks, bonds, retirement accounts) to qualify. Perfect for retirees or high-net-worth individuals.
4. Foreign National Loans
Purchase US property without a Social Security Number using international documentation and ITIN.
Qualification Requirements
While more flexible than conventional loans, NON-QM mortgages still have standards:
- Credit Score: Typically 620-680 minimum (varies by program)
- Down Payment: Usually 10-25% depending on loan type and property
- Reserves: 6-12 months of mortgage payments in liquid assets
- Property Types: Primary residence, second home, or investment property
Interest Rates and Costs
NON-QM loans typically carry slightly higher interest rates than conventional mortgages (usually 0.5-2% higher) due to increased flexibility and risk. However, for borrowers who can't qualify conventionally, the ability to purchase or refinance is worth the premium.
Is a NON-QM Loan Right for You?
Consider a NON-QM mortgage if you:
- Have been denied by traditional lenders due to income documentation
- Are self-employed with complex tax returns showing low taxable income
- Need to purchase investment property without using your personal income
- Have significant assets but limited W-2 income
- Are a foreign national seeking US property ownership
Next Steps
Ready to explore your NON-QM mortgage options? Contact NS Funding for a free consultation. Our NON-QM specialists will review your unique situation and recommend the best loan program for your needs.