Non-QM Loans

1. Flexible Income Documentation
   
   • Borrowers can qualify without traditional income verification (W-2s, tax returns).
   • Commonly use bank statements, rental income, asset depletion, or DSCR (Debt Service Coverage Ratio) instead.

1. Higher Debt-to-Income (DTI) Ratios
   
   • Traditional QM loans cap DTI at 43-50%.
   • Non-QM loans allow DTI above 50% in some cases.

1. Alternative Credit History
   
   • Borrowers with low credit scores, prior bankruptcies, or self-employment can qualify.
   • Lenders may consider payment history, assets, and rental income instead of credit score alone.

1. Higher Interest Rates
   
   • Higher risk = higher rates (typically 1-3% above conventional loans).
   • Rates vary depending on creditworthiness, income verification type, and down payment.

1. Larger Loan Amounts (Jumbo Loans)
   
   • QM loans follow Fannie Mae & Freddie Mac loan limits (e.g., $766,550 for 2024 in most areas).
   • Non-QM loans can exceed these limits, making them ideal for luxury or high-value properties.

1. Longer or Interest-Only Loan Terms
   
   • Some lenders offer 40-year terms or interest-only payments to lower monthly costs.

✅ Self-Employed Borrowers

• Business owners, freelancers, and independent contractors.
• Use bank statements, 1099 forms, or profit/loss statements instead of W-2s.

✅ Real Estate Investors

• Use DSCR loans where rental income qualifies instead of personal income.
• No DTI requirements, making it easier to finance multiple properties.

✅ Foreign Nationals

• No U.S. credit history required.
• Often qualify using bank statements, foreign income, or assets.

✅ High Net Worth Individuals

• Can use asset depletion loans (loan based on liquid assets instead of income).

✅ Borrowers with Credit Challenges

• Recent bankruptcies, foreclosures, or late payments may still qualify.

✅ Pros
✔️ Easier approval for self-employed, investors, and credit-challenged borrowers.
✔️ Alternative income verification (bank statements, DSCR, asset depletion).
✔️ Higher loan limits than conventional loans.
✔️ No limit on financed properties for real estate investors.

❌ Cons
❌ Higher interest rates (typically 1-3% above conventional loans).
❌ Larger down payments required (15-30%+).
❌ Fewer lenders offer Non-QM loans, limiting options.

🔹 Self-employed professionals who can’t verify income traditionally.
🔹 Real estate investors needing DSCR loans or financing for multiple properties.
🔹 Foreign nationals without U.S. credit history.
🔹 Luxury home buyers needing jumbo loan options.
🔹 Borrowers with past credit issues (bankruptcies, late payments, high DTI).