Non-QM Loans

What is a Non-Qualified Loan?

Depending on the type of mortgage you’re interested in and the specific loan terms you’re looking for, a non-qualified mortgage may be a good fit for you.

A non-qualified mortgage — or non-QM — is a home loan that is not required to meet agency-standard documentation requirements as outlined by the Consumer Financial Protection Bureau (CFPB).

Non-QM loans may encapsulate a wide variety of mortgages, including:

  • Bank Statement – Self-employed borrowers can qualify using personal or business bank statements instead of tax returns.
  • Investor Cash Flow – Real estate investors can grow their portfolios using our easy and quick to close debt service coverage ratio (DSCR) product. No tax returns required.
  • Platinum Jumbo – A non-QM option for borrowers who miss Prime Jumbo qualifications.
  • Portfolio Select – A full doc loan that allows just one year out of foreclosure, short sale or deed-in-lieu and two years out of bankruptcy.
  • Asset Qualifier – Qualify on liquid assets instead of income.
  • Foreign National – Allows foreign nationals to purchase investment property in the U.S.

Non-QM loans may also exceed the CFPB’s current price-based thresholds:

  • QM Safe Harbor APR ≤ APOR + 1.50%
  • QM Rebuttable Presumption: APR > APOR + 1.50%, but ≤ 2.25%

Avoiding those agency-standard documentation requirements means lenders do not need to make a good faith determination on the borrower’s ability to repay a non-QM loan. In this case, “good faith determination” usually refers to checking W2 forms, pay stubs, bank statements and other documents that verify you make enough money to eventually pay back your home loan.

If you’re thinking that sounds pretty risky, then you would be absolutely right. Homebuyers who use non-qualified mortgages are not protected by the CFPB. But, because non-QM loans are not burdened by those CFPB rules, lenders are able to offer more flexible income requirements while setting higher interest rates to offset the added risk.