🏠 What is a Non-QM Loan?
A Non-QM Loan (Non-Qualified Mortgage) is a type of home loan that doesn’t meet the standard guidelines set by the CFPB for Qualified Mortgages (QM).
💡 Why Do Non-QM Loans Exist?
They’re designed for borrowers with unique financial situations, like:
- Self-employed individuals
- Real estate investors
- Business owners
- Retirees with assets but low income
- Foreign nationals
🧾 Key Differences from Qualified Mortgages
| Feature | Qualified Mortgage (QM) | Non-Qualified Mortgage (Non-QM) |
|---|
| Follows CFPB rules | ✅ Yes | ❌ No |
| DTI ratio limits | ✅ Yes (max ~43%) | ❌ More flexible |
| Standard income docs | ✅ Required | ❌ May accept alt docs |
| Ability-to-Repay rule | ✅ Must be verified | ✅ Still applies |
| Rates & fees | ❌ Limited | ✅ May be higher |
🧰 Common Types of Non-QM Loans
- Bank Statement Loans – Use 12–24 months of statements instead of tax returns
- Asset Depletion Loans – Qualify based on assets instead of income
- Interest-Only Loans – Pay interest only for a set period
- DSCR Loans – Based on rental income (Debt Service Coverage Ratio)
- Foreign National Loans – For non-U.S. residents buying property
⚠️ Pros and Cons
✅ Pros:
- Flexible qualification guidelines
- Ideal for non-traditional income sources
- Can help achieve homeownership or invest
❌ Cons:
- Higher interest rates & fees
- Larger down payments may be needed
- Less widely available