For many homebuyers, the path to homeownership follows a traditional route: W-2 income, strong credit, and a standard debt-to-income ratio. But today’s borrowers don’t always fit that mold. Entrepreneurs, investors, self-employed professionals, and those with unique financial situations often need alternative solutions. That’s where non-QM (non-qualified mortgage) home loans come in.
What Is a Non-QM Mortgage?
“QM” stands for qualified mortgage, a loan category created after the 2008 housing crisis to ensure that lenders followed safer lending practices. Qualified mortgages or traditional mortgages must meet certain government requirements, like limits on debt-to-income (DTI) ratios and the use of standard income documentation.
A non-QM mortgage is any loan that doesn’t meet those guidelines but is still a safe, responsible lending option. Non-QM loans are not “bad loans”—they’re simply alternative loan programs designed to serve borrowers with nontraditional financial profiles.
Who Are Non-QM Mortgages For?
Non-QM loans are a fit for a wide variety of borrowers, including:
- Self-employed borrowers: If your income is tied up in your business, you may not show enough qualifying income on your tax returns. Non-QM programs allow you to qualify using bank statements or profit-and-loss statements instead.
- Real estate investors: Investors often care more about cash flow than personal income. With DSCR (debt service coverage ratio) loans, you can qualify based on the rental income the property generates.
- Borrowers with credit challenges: Life happens. Non-QM programs provide options for those who may have lower credit scores, recent credit events, or less-than-perfect histories.
- Asset-rich borrowers: If your wealth is in assets rather than income, you can qualify through asset depletion loans, where savings, retirement accounts, or other investments are used to demonstrate repayment ability.
- Retirees: Those with significant savings but limited monthly income can benefit from non-QM programs that take assets into account.
Common Types of Non-QM Loan Options
At APM, we’ve built a comprehensive suite of non-QM products to serve borrowers in nearly every situation. Here are some of the most popular:
1. Bank statement loans
Instead of using tax returns, these loans rely on 12 to 24 months of bank statements (personal or business) to calculate qualifying income for your monthly payment. Perfect for self-employed people, freelancers, and entrepreneurs.
2. DSCR loans (investor loans)
Designed for real estate investors, DSCR loans qualify borrowers based on property income instead of personal income. If the rent covers the mortgage, or close to it, you’re in business.
3. Asset depletion loans
Here a borrower’s assets are divided over a set period (usually 360 months) to create a monthly income figure for qualification. This is a great option for retirees or high-net-worth individuals.
4. ITIN loans
Borrowers with an Individual Taxpayer Identification Number (ITIN) can access financing to achieve homeownership, even without a Social Security number.
5. Credit flexibility programs
While conventional loans often require a 620 FICO, APM’s non-QM products can extend to borrowers with credit scores as low as 600.
6. Specialty programs
Non-QM also covers interest-only options, condo loans, and financing for unique property types that may not meet conventional lending requirements.
How to Qualify for a Non-QM Loan
The qualification process for non-QM is different from conventional loans, but still straightforward. Here’s what you can expect:
- Alternative documentation: Instead of W-2s and tax returns, you may provide bank statements, rental income documentation, or asset statements.
- Credit profile: While flexibility exists, lenders still review your credit report and credit history. Your score, repayment history, and overall financial profile will guide approval and pricing.
- Down payment: Non-QM loans often require a larger down payment (commonly 10% to 20%), though specifics vary by program.
- Debt-to-income ratios (DTIs): Non-QM programs may allow higher DTIs, but lenders will also consider compensating factors such as monthly debts, assets, reserves, or rental income.
- Ability to repay rule: Lenders must still demonstrate that you have the ability to repay the loan, even if it’s documented differently than in traditional loans.
Loan Features
- Flexibility: Tailored to unique financial situations.
- Expanded access: Allows borrowers to qualify for financing even if they couldn’t under traditional rules.
- Diverse options: From bank statement loans to investor-focused programs, non-QM covers a wide range of borrower needs.
- Opportunity: Helps self-employed borrowers, retirees, and investors tap into real estate opportunities without restrictive guidelines.
When to Consider a Non-QM Mortgage
You might want to explore non-QM loan options if:
- You’re self-employed and write off significant expenses.
- You’re a real estate investor looking to expand your portfolio.
- You’ve had a recent credit event (such as a bankruptcy or foreclosure) but are financially stable today.
- You’re a foreign national or ITIN borrower wanting to purchase property in the U.S.
- You’re retired or asset-rich but have limited monthly income.
If any of these situations sound like you, a non-QM mortgage could be the right fit.
Your Path to Homeownership with Non-QM Loans
Non-QM mortgages open the door for countless homebuyers and investors who don’t fit into the “traditional” lending box. They’re flexible, responsible, and designed for real people with real financial stories.
At APM, we believe your dreams shouldn’t be limited by rigid guidelines. With our full suite of non-QM loan products, we help you find the financing solution that matches your life, your goals, and your future. Connect with a local APM Loan Advisor today.