Non-QM Loans: What Are They and Who Are They For?

When it comes to buying or refinancing a home, most people are familiar with traditional mortgage loans that follow standard lending rules. But what if your financial situation doesn’t fit into that mold? That’s where Non-QM loans come in.

What Is a Non-QM Loan?

A Non-QM mortgage loan, short for Non-Qualified Mortgage, is a loan that does not meet the definition for a Qualified Mortgage as defined by the Consumer Financial Protection Bureau’s (CFPB). The definition was created to provide banks and lenders with safe harbor to show they analyzed a consumer’s ability to repay based on typical income documentation.

Just because a loan is classified as Non-QM doesn’t mean it’s risky or unsafe. It simply means that it uses alternative methods for evaluating a borrower’s ability to repay the loan.

Why Would Someone Choose a Non-QM Loan?

A Non-QM loan can be a smart option for borrowers who are financially stable but have non-traditional income or unique circumstances. Some common scenarios include:

• Self-employed borrowers who write off expenses and don’t show a high net income on tax returns

• Real estate investors who want to use rental income to qualify

• High net worth individuals who have strong assets but little monthly income

• Foreign nationals buying property in the U.S.

Types of Non-QM Loans

There are several types of Non-QM loans designed to meet the needs of unique borrowers:

• Bank Statement Loans: Instead of W-2s or tax returns, borrowers can use 12–24 months of bank statements to verify income.

• Asset Depletion Loans: Income is calculated based on liquid assets, such as savings or investment accounts.

• Investor Cash-Flow Loans (DSCR Loans): Qualification is based on the income a property generates, not personal income.

• Interest-Only Loans: Borrowers can pay just the interest for a period of time before principal payments begin.

Is a Non-QM Loan Right for You?

In today’s diverse financial landscape, one-size-fits-all lending simply doesn’t work for everyone. Non-QM mortgage loans offer a flexible alternative for qualified borrowers whose income, assets, or other factors don’t meet traditional requirements. Whether you're self-employed, an investor, or navigating a complex financial picture, Non-QM options could provide the path to homeownership that you’ve been looking for. As always, working with an experienced Northpoint Loan Officer can help you understand the best options for your situation, and guide you every step of the way.