Non-QM Loans — Qualify on Your Actual Financial Picture

Conventional loans qualify you on W-2s, tax returns, and Fannie Mae guidelines. Non-QM loans qualify you on bank deposits, rental income, or assets — however your finances actually work. Built for self-employed buyers, investors, and anyone a conventional lender turned down.

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Not sure if non-QM applies to you? See who it's built for

Self-employed buyer reviewing non-QM loan options with a mortgage broker

What Is a Non-QM Loan?

A non-QM loan (non-qualified mortgage) is a home loan that doesn't meet Fannie Mae and Freddie Mac's underwriting standards — so it can't be sold to them. The lender holds the loan or sells it to a private investor, which gives them the flexibility to use alternative qualifying methods.

Non-QM is not subprime. The borrowers are often high-income and high-net-worth — they just don't fit the conventional documentation box. A business owner whose tax returns show $40K after deductions but whose deposits show $180K isn't a risky borrower. They're just not a conventional borrower.

The tradeoff is cost: non-QM rates run higher than conventional because the lender carries more risk. But for buyers who don't qualify conventionally, it's often the only path — and a legitimate one.

Non-QM at a glance

Income docsBank statements, 1099s, leases, asset statements
Down paymentTypically 10–25% depending on loan type
Credit scoreFlexible — some lenders go below 620
Loan termStandard 15 or 30-year fixed, ARM options
Rate vs conventionalTypically 0.5%–2%+ higher
Best forSelf-employed, investors, credit events, high assets

Who Non-QM Loans Are Built For

If a conventional lender turned you down — or if you haven't applied because you assume you won't qualify — one of these situations likely describes you.

Self-employed borrowers

Your tax returns show low taxable income after deductions — but your bank deposits tell a different story. Bank statement loans use 12–24 months of deposits as income instead of tax returns.

Real estate investors

DSCR loans qualify based on the property's rental income, not your personal income. If the rent covers the mortgage, you can qualify — no W-2, no DTI calculation against your personal earnings.

High-asset, lower-income borrowers

Asset depletion loans count investment portfolios, retirement accounts, and liquid assets as qualifying income — divided over the loan term. Retired or semi-retired buyers often use this path.

1099 contractors and gig workers

1099 income is harder for conventional lenders to count consistently. Non-QM lenders are built for variable, contract-based income — using 1099s, contracts, or bank statements.

Recent credit events

Conventional guidelines require 4–7 years after a bankruptcy or foreclosure. Non-QM lenders may approve 1–2 years out, with larger down payments and rates that reflect the risk.

High debt-to-income borrowers

Conventional loans cap DTI around 43–50%. Non-QM lenders can go higher — especially for borrowers with strong assets or a low LTV — because they're not selling the loan to Fannie or Freddie.

Non-QM Loan Types

Non-QM isn't one product — it's a category. Each loan type uses a different alternative documentation method. The right one depends on your situation.

DSCR loan

How you qualifyGross monthly rent ÷ monthly housing payment (PITIA). No W-2, no personal DTI calculation.
Best forReal estate investors — qualify on the property's cash flow, not your income.
Full DSCR guide

Bank statement loan

How you qualify12–24 months of personal or business bank deposits replace tax returns as income verification.
Best forSelf-employed buyers with strong cash flow but high write-offs on tax returns.
Full bank statement guide

Asset depletion loan

How you qualifyLiquid assets (investments, retirement accounts) divided over the loan term to derive qualifying income.
Best forRetirees and high-net-worth borrowers with significant assets but low ongoing income.

1099 loan

How you qualify1099 forms or contracts instead of W-2s. Lender derives income from your 1099 history directly.
Best forContractors, consultants, and gig workers with variable, contract-based income.

Interest-only loan

How you qualifyStandard or alternative income documentation — you qualify as normal, but the loan structure is interest-only.
Best forBorrowers who want lower initial payments or plan to sell or refi before principal kicks in.

Non-warrantable condo / niche property

How you qualifyStandard income documentation — the non-QM designation comes from the property, not you.
Best forBuyers purchasing condos with high investor concentration, active litigation, or other traits Fannie won't touch.

See What You Qualify For

Takes about 2 minutes · No credit check · No obligation

Connect with a lender who works with non-QM programs. They can match your situation to the right loan type and tell you what you qualify for.

  • NMLS-licensed lenders
  • See options with no initial credit impact

How it works

  1. 1Enter your info — takes about 2 minutes
  2. 2Get matched with non-QM lenders for your situation
  3. 3Get your official answer from a matched lender
Get your answer

Conventional Turned You Down Doesn't Mean You're Out

Non-QM lenders are built for income that doesn't show up cleanly on a tax return — business owners, investors, contractors, and buyers coming back from a credit event. Connect with a lender who works with these programs and find out what you actually qualify for.

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Self-employed buyer in front of their home, financed with a bank statement non-QM loan

NMLS-licensed lenders Fast Lender Matching No initial credit impact

Related Resources

DSCR loans

Qualify on your rental property's income, not your personal income. The primary non-QM product for real estate investors.

See DSCR loans

Bank statement loans

12–24 months of deposits replace tax returns. The go-to path for self-employed buyers with strong cash flow but high deductions.

See bank statement loans

Non-QM deep dive

Detailed guide to non-QM loan types, requirements, and how they compare to conventional.

Read guide

Piggyback loans

Using a second mortgage to reduce your down payment or avoid PMI — often coordinated with non-QM seconds.

Learn more

Key terms

Non-QM loanA mortgage that falls outside Fannie/Freddie guidelines — qualifies on alternative income documentation.Bank statement loan12–24 months of deposits replace tax returns as income verification for self-employed borrowers.DSCRGross monthly rent ÷ monthly payment. Used to qualify investment property loans without personal income.Asset depletionLiquid assets divided over the loan term to generate qualifying income — common for retirees.Qualified mortgage (QM)The standard Fannie/Freddie loan. Non-QM sits outside this framework — more flexibility, higher rate.LTVLoan amount ÷ home value. Lower LTV reduces your rate and increases approval odds on non-QM loans.DTIMonthly debt ÷ gross income. Non-QM lenders can go beyond the 43–50% conventional cap.

View full mortgage glossary →

Non-QM Loan FAQ

What is a non-QM loan?

A non-QM loan (non-qualified mortgage) is a home loan that doesn't meet the underwriting standards set by Fannie Mae and Freddie Mac — and therefore can't be sold to them. Instead, the lender holds the loan or sells it to a private investor. This frees the lender to use alternative qualification methods: bank statements instead of tax returns, rental income instead of personal income, or assets instead of a paycheck. Non-QM loans are not subprime loans — they're loans for borrowers with real income and real assets who don't fit the conventional box.

Who is a non-QM loan right for?

Non-QM loans are built for self-employed borrowers whose tax returns understate their income, real estate investors who want to qualify on rental income (DSCR), retirees or high-net-worth buyers with assets but low ongoing income, 1099 contractors and gig workers, borrowers with a recent bankruptcy or foreclosure, and buyers purchasing non-warrantable condos or other properties conventional lenders won't finance.

How does a bank statement loan work?

A bank statement loan replaces tax returns with 12 or 24 months of bank statements. The lender adds up your deposits and applies an expense factor (typically 50% for business accounts, 0% for personal accounts) to arrive at a monthly qualifying income. If your business deposits average $20,000/month and the lender uses a 50% factor, your qualifying income is $10,000/month. This works well for self-employed borrowers with high gross revenue who write off significant expenses on their taxes.

What is a DSCR loan?

A DSCR (Debt Service Coverage Ratio) loan qualifies based on the property's rental income rather than the borrower's personal income. DSCR = gross monthly rent ÷ monthly PITIA (principal, interest, taxes, insurance, HOA). A DSCR of 1.0 means the rent exactly covers the payment; most lenders require 1.0–1.25. If the math works, you can qualify with no W-2 and no personal DTI calculation. DSCR loans are the most common non-QM product for real estate investors.

Are non-QM loans more expensive than conventional?

Yes, typically. Non-QM lenders hold more risk because they can't sell to Fannie or Freddie, so rates run 0.5%–2%+ higher than comparable conventional rates depending on the loan type, LTV, and borrower profile. A larger down payment (lower LTV) reduces the rate premium. For borrowers who don't qualify conventionally, the rate premium is often irrelevant — it's either a non-QM loan or no loan.

What down payment is required for a non-QM loan?

Down payment requirements vary by loan type and lender. Bank statement loans typically require 10–20% down. DSCR loans for investment properties often require 20–25%. Asset depletion and 1099 loans vary by lender. Borrowers with recent credit events generally need more — 20–30% is common. A larger down payment reduces your rate and increases approval chances.

How is non-QM different from hard money?

Hard money loans are asset-based short-term bridge loans — typically 6–24 months — used for fix-and-flip projects or quick closings. Non-QM loans are long-term mortgages (15 or 30 years) for buyers or investors who want to hold the property. Non-QM rates are higher than conventional but far lower than hard money. If you're buying a rental property to hold, non-QM is the right product; if you're flipping, hard money is more appropriate.

Can I refinance into a conventional loan later?

In many cases, yes. Borrowers often use a non-QM loan as a bridge — qualify now with alternative documentation, then refinance into a conventional loan in a few years once they have more documented income history, the credit event is further in the past, or they've built equity. A broker can help you plan the path: non-QM now, conventional refi later.