- Who it’s for: Borrowers whose income or situation doesn’t fit standard paperwork: business owners, contractors, retirees with assets, investors, ITIN and foreign borrowers.
- What you’ll need: Proof you can repay, just a different kind: bank statements, a P&L, 1099s, asset statements or the property’s rent, plus credit, a down payment and often reserves.
- Keep in mind: It usually costs more than a conventional loan. If your tax returns already qualify you, start there.
Typical ranges among non-QM lenders as of October 2026. They vary by lender, credit, loan size, occupancy and property, and they are not a LoanFight quote, approval or guarantee.
QM vs. non-QM: what the rule actually says
Since 2014, the CFPB’s Ability-to-Repay rule (Regulation Z, 12 CFR 1026.43) has required lenders on most home loans to make a reasonable, good-faith determination that the borrower can repay. The rule lists the factors a lender must consider, including income or assets, employment, the new payment, other mortgage costs, current debts, debt-to-income or residual income, and credit history, and it requires income and assets to be verified with reasonably reliable third-party records.
A Qualified Mortgage (QM) is a loan that also meets a stricter set of product and pricing standards. In exchange, the lender gets a legal presumption that it complied with Ability-to-Repay. A non-QM loan is everything else: it still has to satisfy Ability-to-Repay (when it is a consumer loan), but without that presumption.
General Qualified Mortgage (12 CFR 1026.43(e)(2))
- Regular, substantially equal payments: no interest-only period, negative amortization or balloon payment
- Loan term of 30 years or less
- Points and fees capped (generally 3% of the loan amount on larger loans, with higher caps for smaller loans; thresholds adjust each year)
- Income, assets and debts considered and verified, with DTI or residual income weighed
- Price-based limit: the APR can’t exceed the average prime offer rate by 2.25 percentage points or more on most first-lien loans (higher thresholds for smaller loans and subordinate liens)
Non-QM
- Still must meet Ability-to-Repay on a consumer loan
- Can verify income with bank statements, a P&L, 1099s or assets
- Can include interest-only payments or a 40-year term
- Can be priced above the QM price threshold
- Kept by the lender or sold to private investors, not to Fannie Mae or Freddie Mac
- On an owner-occupied loan, a prepayment penalty is generally not allowed (12 CFR 1026.43(g))
Other QM categories exist too (for example small-creditor and seasoned QMs, and FHA, VA and USDA loans under their agencies’ own QM definitions). Loans sold to Fannie Mae and Freddie Mac are built to their guides, which use standard tax-return and pay-stub documentation for self-employed and salaried borrowers. That is why a self-employed borrower whose write-offs shrink taxable income often ends up looking at non-QM.
Types of non-QM loans (2026)
“Non-QM” is a category, not one product. Each type below solves a different documentation or property problem. Leverage figures are typical or “select program” ranges, not one lender’s guidelines.
| Program | Who it’s for | How income is documented | Typical leverage (varies by lender) |
|---|---|---|---|
| Bank statement | Self-employed borrowers whose tax returns understate cash flow | 12 or 24 months of personal or business deposits; business accounts get an expense factor (commonly 15–50% by business type) or a CPA ratio | Commonly 80–90% on a primary purchase; 90% generally with 680+ and moderate loan sizes |
| P&L only | Self-employed borrowers with a CPA-, EA- or tax-preparer-signed P&L | 12- or 24-month P&L, sometimes with about 3 months of bank statements | Commonly up to about 85% purchase / 80% refinance; ~680+ common, select programs 660 at up to 80% |
| 1099 | Independent contractors and commissioned 1099 earners | 1 or 2 years of 1099s, commonly with a flat ~10% expense factor | Commonly 80–90% on a primary purchase |
| Asset depletion / utilization | Retirees and borrowers with large assets but uneven income | Eligible assets, minus funds to close, divided by commonly 60 or 84 months | Select programs up to 85% on a primary purchase or rate/term refinance with 700+; ~660+ common |
| DSCR (investor, business-purpose) | Investors buying or refinancing 1–4 unit rentals | The property’s rent compared with the full payment (PITIA); no personal DTI | Commonly 75–80%; select programs up to 85% purchase with ~700–720+ on loans to about $1M |
| No-ratio / stated income (investor) | Investors whose rent doesn’t cover the payment or who don’t want to document income | No DTI and often no minimum DSCR; equity, credit and reserves carry the file | Commonly about 65–75% |
| ITIN | Borrowers who file taxes with an ITIN instead of a Social Security number | Tax returns or bank statements, depending on the program | Commonly 75–85% on a primary purchase; select programs 85% with ~700+ (loans to about $1.2M), 80% with no U.S. credit score |
| Foreign national | Buyers who live abroad purchasing a U.S. rental or second home | Passport and visa or entry documents, assets and often the property’s rent | Commonly 70–75% (25–30% down) |
| Interest-only | Borrowers who want a lower payment for the first years (often 10) | Any of the methods above | Select programs up to 85% on a purchase with 700+ credit; commonly lower |
| Recent credit event | Borrowers with a bankruptcy, foreclosure, short sale or deed-in-lieu in the last few years | Full or alternative documentation | Some programs: 12+ months after the event up to about 75% (loans to ~$3M); 24+ months up to about 80% (~$3.5M); 48 months typically no restriction |
| Non-QM jumbo | Loan amounts above the 2026 conforming limit ($832,750 baseline) with alternative documentation | Any of the methods above | Select programs lend up to about $4M on a primary home at lower LTV with 720+ credit |
| Non-warrantable condo | Buyers of condos in projects that miss Fannie Mae or Freddie Mac standards | Full or alternative documentation | Commonly 80–85% on a primary home; select programs up to 90% with 680+ (loans to $1M) |
Leverage shown is the best commonly published range for each program type as of October 2026, not one lender’s guideline and not a LoanFight offer. Lower credit, larger loans, cash-out, second homes and investment property usually mean lower leverage.
Pros and cons of non-QM loans
- Income the way you actually earn it: deposits, a P&L, 1099s, assets or rent instead of tax returns.
- More property types: non-warrantable condos, rentals held in an LLC, larger loan sizes.
- More borrower types: ITIN borrowers, foreign nationals, recent credit events.
- Flexible features: interest-only and 40-year options with some lenders.
- Higher pricing: rates and costs are typically above a comparable agency loan.
- Larger down payments: commonly 10–20% on a primary home, more on investment property.
- Prepayment penalties on many investor loans: common on DSCR and other business-purpose loans where state law allows.
- Fewer lenders, more variation: each lender writes its own matrix, so two offers can differ a lot.
The exit plan: many borrowers use non-QM to buy now and refinance into a conventional, FHA or VA loan later, once two years of tax returns support the income or a credit event has aged out. Ask what the refinance path would look like before you lock.
Who qualifies: what non-QM lenders look at
| Factor | Typical range (varies by lender) |
|---|---|
| Credit score | Commonly about 620–660+; select programs 600 at up to 80% LTV (loans to $1M) on full-doc, bank-statement, 1099 or asset files; P&L-only commonly 660–680+; best leverage and pricing often at 700+ |
| Debt-to-income (DTI) | Commonly up to 50%; some lenders allow 55% on a purchase or rate/term refinance with higher credit, lower LTV and a residual-income test; asset-utilization programs are often capped lower (commonly about 43%) |
| Documentation period | Commonly 12 or 24 months of bank statements or P&L; 1 or 2 years of 1099s |
| Self-employment history | Commonly 2 years, shown with a business license, CPA letter or similar |
| Reserves | Commonly 0–9 months of PITIA, rising with loan size and LTV; some lenders waive reserves on lower-LTV primary purchases |
| Credit events | Bankruptcy, foreclosure, short sale or deed-in-lieu: some programs 12+ months after the event at up to about 75%, 24+ months at up to about 80%; 48 months typically removes the restrictions |
| Down payment | Commonly 10–20% on a primary home; commonly 20–25% on DSCR rentals; commonly 25–30% for foreign nationals |
| Loan amount | Commonly from about $100,000 to $3 million, with some lenders going to about $4 million on a primary home at lower LTV |
Worked example: $30,000 a month of business deposits
A sole owner of a small business uses 12 months of business bank statements. Eligible deposits (after removing transfers and other non-income items) total $360,000. The lender classifies the business as a small business and applies a 30% expense factor, and allows a 50% maximum DTI. Existing debts are a $650 car payment, $250 in minimum card payments and a $300 student loan. These are illustrative assumptions, not a quote.
| Eligible deposits over 12 months | $360,000 |
| Monthly average: $360,000 ÷ 12 | $30,000 |
| Less 30% expense factor: $30,000 × 30% | −$9,000 |
| Qualifying monthly income | $21,000 |
| Maximum total monthly debt at 50% DTI: $21,000 × 50% | $10,500 |
| Maximum total monthly debt | $10,500 |
| Less existing debts ($650 + $250 + $300) | −$1,200 |
| Room for the full housing payment (principal, interest, taxes, insurance and HOA) | $9,300 |
Is a non-QM loan safe? How to compare offers
A non-QM loan from a licensed lender is a regulated mortgage: on a home you live in, the lender has to verify that you can repay, give you a Loan Estimate within three business days of your application and a Closing Disclosure before closing. The risk is less about legality and more about fit and cost. Before you choose:
- Compare at least two Loan Estimates for the same loan amount and lock period. Use our Loan Estimate comparison tool and the page-by-page guide How to read a Loan Estimate.
- Check the Loan Terms box on page 1: it says whether there is a prepayment penalty or a balloon payment.
- Look at the APR and total costs, not just the rate. Section A shows what the lender charges.
- Ask about interest-only: what the payment becomes when the interest-only period ends.
- Ask for the income calculation in writing, including the expense factor or asset divisor.
- Run the full-doc option first: if your tax returns qualify, a conventional loan is usually cheaper.
The CFPB explains each section of the form on its Loan Estimate explainer.
Find the right non-QM program
Tell us how you earn your income, the property and your rough numbers. LoanFight reviews the scenario and connects you with lending partners whose programs fit it. LoanFight is not a lender, and nothing here is a commitment to lend.
See My Loan Options →Non-QM loan FAQs
What is a non-QM loan?
A non-QM (non-qualified mortgage) loan is a home loan that does not meet the CFPB’s Qualified Mortgage definition in Regulation Z. For a home you live in, the lender still has to make a reasonable, good-faith determination that you can repay, but it can verify income with bank statements, a P&L, 1099s or assets instead of tax returns, or offer features such as interest-only payments or a 40-year term.
Is a non-QM loan bad or risky?
Not by itself. Non-QM simply means the loan sits outside the Qualified Mortgage definition, and consumer non-QM loans are still covered by the Ability-to-Repay rule. The trade-offs are cost and features: pricing is usually higher than an agency loan, down payments are often larger, and features like interest-only payments raise the payment later. Read the Loan Estimate closely and compare it with other offers.
Who are non-QM loans for?
Mostly borrowers with real income or assets that standard documentation does not capture: self-employed borrowers whose tax returns show less after write-offs, independent contractors, retirees or investors with large assets, borrowers with an ITIN or who live abroad, real estate investors qualifying from rent, and buyers of condos that miss agency standards.
Is non-QM the same as subprime?
No. Before 2008, many subprime loans were made without verifying that the borrower could repay. Today, consumer non-QM loans must meet the Ability-to-Repay rule, which requires verified income or assets, debts and credit history. Many non-QM borrowers have strong credit; what is different is how the income is documented or which loan features are used.
What credit score do I need for a non-QM loan?
Minimums commonly run about 620–660 and up, and the best leverage and pricing are often at 700+. Select programs go as low as 600 on full-documentation, bank-statement, 1099 or asset-based files, at up to 80% LTV on loans up to $1 million; P&L-only files commonly need 660 or more. A few full-documentation programs go below 600 with much lower leverage (about 65%), but they are not offered in every state, including New Jersey. It varies by lender.
How much down payment does a non-QM loan require?
On a primary-home purchase, maximum LTV commonly runs about 80–90%, so 10–20% down, with 90% generally reserved for stronger credit (often 680+) and moderate loan sizes. Investor loans such as DSCR commonly need 20–25% down, select programs going to 15% down with about 700–720+ credit, and foreign-national loans commonly need 25–30% down. It varies by lender.
Can I refinance out of a non-QM loan?
Often, yes. Many borrowers use non-QM as a bridge and later refinance into a conventional, FHA or VA loan once two years of tax returns support the income or a credit event is far enough behind them. On an owner-occupied non-QM loan, Regulation Z generally does not allow a prepayment penalty; on investor loans, check the prepayment terms before you sign.
Are non-QM rates higher?
Usually, yes. Non-QM pricing is commonly higher than a comparable conventional loan, because the lender keeps more risk, the loans are not sold to Fannie Mae or Freddie Mac, and the lender does not get the legal presumption of compliance a Qualified Mortgage has. Pricing also moves with credit, LTV, documentation type and loan size. If your tax returns already qualify you, a full-documentation loan is often cheaper.
Related programs and tools
Sources and review notes
Credit, LTV, DTI, reserve and loan-size ranges on this page describe commonly published terms in non-QM lending as of October 2026; they are not any single lender’s guidelines and not a LoanFight quote. The regulatory points come from the primary sources below.
CFPB — Regulation Z, 12 CFR 1026.43: Ability-to-Repay and Qualified Mortgage rule ↗CFPB — Official interpretation of § 1026.43 ↗eCFR — 12 CFR 1026.43, Minimum standards for transactions secured by a dwelling ↗CFPB — Regulation Z § 1026.3, exempt transactions (business-purpose credit) ↗CFPB — Loan Estimate explainer ↗