What is a non-QM loan?
"Non-QM" stands for non-qualified mortgage. Don't let the name fool you: it doesn't mean the loan is bad or that you're unqualified. It means the loan verifies your ability to repay differently than a standard mortgage, which relies mostly on tax returns and W-2s.
Who are non-QM loans for?
- Self-employed borrowers. Business write-offs lower the income a standard loan can count. That's just how the math works, and you should file your taxes the right way. A bank statement program looks at deposits instead.
- 1099 and gig workers whose income doesn't fit a standard W-2 history.
- Real estate investors who want to qualify on a property's rent instead of personal income.
- Asset-rich buyers with significant savings but limited regular income.
- Recent credit events such as a past bankruptcy, depending on timing.
What types of non-QM loans are there?
Bank statement loans
Instead of tax returns, the lender reviews 12 to 24 months of personal or business bank statements to calculate your income.
DSCR loans for investors
Debt-service coverage ratio loans qualify on the property: if the expected rent covers the payment, your personal income may not be needed. More on investor loans.
Asset depletion
The lender converts your savings and investments into a monthly income figure. Something similar exists in some conventional programs too. I'm working with a client right now whose roughly $860,000 401(k) balance turned into more than $4,000 a month of qualifying income under Freddie Mac guidelines, which made the loan work.
Actual client example. Asset-based qualifying varies by loan program.
What are the trade-offs?
| Non-QM | Conventional | |
|---|---|---|
| Down payment | Usually 10%–20% or more | As low as 3% |
| Rate | Usually somewhat higher | Lower for strong files |
| Income documentation | Flexible | Tax returns and W-2s |
Non-QM isn't always the answer. Sometimes a conventional or FHA loan works once we look at the full picture, so I always check standard programs first.
Read more: How to Qualify for a Mortgage Loan in Oregon.
Related guides
Frequently asked questions
What is a non-QM loan?
A mortgage that uses different ways to verify you can repay, such as bank statements or assets instead of tax returns. “Non-qualified” refers to a federal rule category, not to you.
Can self-employed borrowers get a mortgage without tax returns?
Often, yes. Bank statement programs use 12 to 24 months of statements to calculate income instead of tax returns. They’re an alternative, not a workaround: you file your taxes the way you should, and we find the program that fits.
Are non-QM rates higher?
Usually somewhat higher than conventional rates, and down payments are usually larger. For the right borrower, the flexibility is worth it.
What is asset depletion?
A way to qualify by converting savings and investments into monthly income for the loan. Some conventional programs allow something similar with retirement accounts.
Educational only, not a commitment to lend. Program guidelines, limits, and pricing change, and every loan is subject to underwriting approval. Example numbers are illustrations, not quotes.
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