Non-QM Loans: Mortgages Built for How You Actually Earn

Instead of tax returns, income is calculated using 12 or 24 months of personal or business bank statements. Lenders average the deposits to determine qualifying income — capturing the cash flow that tax deductions hide. This is the most widely used Non-QM product.

• 12 or 24 months personal or business bank statements
• No tax returns or W-2s required
• Business expense ratio applied to business statements (typically 50%)
• Loan amounts up to $3M+
• Primary, second home, and investment properties
• Credit scores from 620+
• DTI up to 50% on most programs
• Fixed and ARM options available

DSCR loans qualify the borrower based on the property's rental income relative to its debt obligations — not the borrower's personal income. If the property's rent covers the mortgage (DSCR ≥ 1.0), the loan qualifies. No personal income documentation required.

• No personal income or employment verification
• Qualifies on property cash flow (rent ÷ PITIA)
• DSCR as low as 0.75 on some programs
• Single-family, 2–4 unit, condos, short-term rentals (Airbnb/VRBO)
• Loan amounts up to $3M+
• LLCs and entities allowed as borrowers
• Interest-only options available
• No limit on number of financed properties

Qualifying income is calculated by dividing eligible assets (retirement accounts, investment portfolios, savings) by the loan term in months. A borrower with $2M in assets and a 30-year loan would have $5,556/month in "imputed income" — enough to qualify for a substantial mortgage with no employment income.

• Eligible assets: checking, savings, stocks, bonds, retirement (at 70%)
• Formula: assets ÷ loan term months = monthly qualifying income
• No employment or income documentation required
• Retirement accounts discounted to 70% of value
• Loan amounts up to $3M+
• Credit scores from 660+
• Primary and second homes
• Ideal for retirees and high-net-worth individuals

Income is verified using 1099 forms rather than full tax returns. This captures gross contractor income before business deductions — a much higher figure than what appears on Schedule C after write-offs. Some programs use 12–24 months of 1099s; others combine 1099s with bank statements.

• 12 or 24 months of 1099 forms used for income
• No Schedule C or full tax return required
• Captures gross income before deductions
• Works for single or multiple 1099 sources
• Loan amounts up to $2M+
• Credit scores from 620+
• Primary, second home, and investment properties
• Can be combined with bank statement approach

A 12 or 24-month Profit & Loss statement prepared by a licensed CPA is used to verify business income. This is often combined with bank statements for additional verification. Useful for business owners whose tax returns are filed on extension or who have complex business structures.

• CPA-prepared P&L statement (12 or 24 months)
• No tax returns required in many cases
• Often combined with bank statements
• Works for sole proprietors, S-corps, partnerships
• Loan amounts up to $2M+
• Credit scores from 620+
• Primary and investment properties
• Useful when tax returns are on extension

Foreign nationals who do not have a US credit history, Social Security number, or US-based income can still purchase US real estate through specialized Non-QM programs. These loans use foreign income documentation, international credit references, and larger down payments to qualify.

• No US credit history or SSN required
• Foreign income documentation accepted
• Typically 25–30% down payment required
• Investment and second home properties
• Loan amounts up to $2M+
• International bank references accepted
• ITIN (Individual Taxpayer ID) accepted
• Visa holders and non-resident aliens eligible

ITIN loans allow borrowers who have an Individual Taxpayer Identification Number (but not a Social Security Number) to qualify for a mortgage. These borrowers often have strong income and payment histories but are excluded from conventional programs due to the SSN requirement.

• ITIN accepted in place of Social Security Number
• Alternative credit history accepted (rent, utilities, insurance)
• Income verified via bank statements or tax returns
• Down payments typically 10–20%
• Primary residence focus
• Loan amounts up to $1.5M
• Credit scores from 600+
• Available in FL, SC & TN

Interest-only Non-QM loans allow borrowers to pay only the interest portion of the mortgage for an initial period (typically 5–10 years), resulting in significantly lower monthly payments. After the interest-only period, the loan converts to fully amortizing. Often combined with other Non-QM income documentation.

• Interest-only period: typically 5 or 10 years
• Significantly lower monthly payments during IO period
• Converts to fully amortizing after IO period
• Available on bank statement, DSCR, and asset depletion programs
• Loan amounts up to $3M+
• Primary, second home, and investment properties
• Fixed and ARM options
• Useful for investors maximizing cash flow

• Access to homeownership for borrowers who don't qualify for conventional, FHA, VA, or USDA loans
• Alternative income documentation — bank statements, 1099s, P&L, assets — instead of tax returns
• Higher DTI limits — up to 55%+ vs. 43% QM standard
• DSCR loans require no personal income documentation at all — qualify on rental cash flow
• No limit on number of financed properties (DSCR programs)
• LLCs and entities can be borrowers on DSCR loans
• Loan amounts up to $3M+ — jumbo Non-QM available
• Interest-only options for maximum cash flow flexibility
• Shorter waiting periods after bankruptcy, foreclosure, or short sale on some programs
• Foreign nationals and ITIN borrowers can access US real estate financing
• Can refinance into conventional once two years of tax returns are available
• Competitive rates relative to hard money or private lending alternatives

• Higher interest rates — typically 0.5% to 2.0% above comparable conventional loans
• Larger down payment required — typically 10–25% vs. 3–5% for conventional or FHA
• Higher reserve requirements — 3–12 months PITIA in reserves after closing
• Not eligible for purchase by Fannie Mae or Freddie Mac — sold to private investors
• Fewer lenders offer Non-QM — not available at all banks or credit unions
• More complex underwriting — additional documentation and longer processing times
• Prepayment penalties on some Non-QM products (typically 1–3 years)
• Less consumer protection than QM loans — lenders have less "safe harbor" liability
• Rates and guidelines change more frequently than conventional programs
• May be harder to refinance if market conditions change significantly

• Check for prepayment penalties before closing — some Non-QM products have 1–3 year prepayment penalties that can be costly if you sell or refinance early
• Understand the rate adjustment schedule on ARM products — Non-QM ARMs can adjust significantly after the initial fixed period
• Verify the lender is reputable — Non-QM is a less regulated space; work with an established, licensed lender like CFC
• Plan your exit strategy — if you're using Non-QM as a bridge, know when and how you'll refinance into a conventional loan
• Account for reserves — Non-QM lenders require significant post-closing reserves; make sure you have enough liquid assets after the down payment and closing costs
• Business bank statements: co-mingling personal and business funds can complicate income calculation — keep accounts separate