What Is Non-QM Loan?
Non-QM Loan: A mortgage that doesn't meet the federal Qualified Mortgage rules, used for non-traditional borrowers.
Also called: non-qualified mortgage
A non-QM (non-qualified mortgage) loan doesn't meet the Consumer Financial Protection Bureau's Qualified Mortgage standards. Lenders still must make a reasonable, good-faith determination that you can repay, but they can use other ways to verify it.
Common non-QM loans
- Bank statement loans for self-employed borrowers
- DSCR loans qualified on rental income
- Asset-depletion or asset-qualifier loans
- Loans for borrowers with recent credit events
- Interest-only loans
Trade-offs
Non-QM loans usually have higher rates, larger down payments and sometimes a prepayment penalty. They can still be the best option when your income doesn't fit traditional documentation.
Good to know
Many non-QM borrowers later refinance into a conventional loan once their tax returns or credit support it.