Not everyone’s finances fit the requirements of a traditional mortgage. If you’re self-employed, own investment properties, or have significant savings but limited regular income, a Non-QM loan may be an option.
Non-QM loans offer more flexibility in how lenders review your finances. While requirements vary by program, lenders typically look at your income, credit history, debts, assets, and ability to repay the loan.
What Are the Requirements for a Non-QM Loan?
Exact requirements can vary by program, but lenders typically looking at the following 6 factors:
1. Income and Employment Documentation
Traditional mortgage lenders usually look at W-2s, tax returns, pay stubs, and employment records to determine how much money you earn.
Some Non-QM loans let you use other types of financial documents to show your income, including:
- Bank statements: Show money coming into your personal or business accounts.
- Profit and loss statements: Show how much money your business earns and spends.
- Asset statements: Show the value of your savings, investments, or other eligible assets.
- Rental income: Show how much money you earn from renting out a property.
For example, a business owner may earn a good income but report less on their tax returns because of business expenses. A bank statement loan may allow the lender to look at the money coming into the business instead of relying only on tax returns.
2. Credit Score and Credit History
Lenders look at your credit score, payment history, current debts, and any major credit problems you’ve had in the past. There is no set minimum credit score for all Non-QM loans. Some programs have more flexible credit requirements, while others may require higher scores.
You also don’t need to have bad credit to apply for a Non-QM loan. Even borrowers with excellent credit may benefit from these loans if their income, savings, or property doesn’t meet traditional mortgage requirements.
3. Debt-to-Income Ratio
Your debt-to-income ratio (DTI) compares how much you pay toward debts each month to how much money you earn. Some Non-QM loans have more flexible DTI requirements than traditional mortgages. Others may look at your finances differently to determine if you can afford the loan. The DTI requirements and how lenders calculate your income depend on the loan program.
For example, some programs let lenders use your savings and investments to calculate income. Others, like Debt Service Coverage Ratio (DSCR) loans, focus on how much rental income a property earns instead of your personal income.
4. Assets and Cash Reserves
Lenders may ask for proof that you have enough money for your down payment, closing costs, and cash reserves. Cash reserves are savings that can help cover future mortgage payments.
They may review your checking, savings, investment, or retirement accounts.
Certain asset depletion mortgage programs also allow lenders to use eligible savings and investments to calculate your income. This can help borrowers who have significant assets but don’t earn a regular paycheck.
Asset and cash reserve requirements vary by loan program.
5. Down Payment and Loan-to-Value Ratio
Lenders compare how much you want to borrow to the property’s value. This is called the loan-to-value ratio (LTV).
If you’re buying a home, your required down payment depends on the loan program and your finances. If you’re refinancing, lenders look at your current mortgage balance and home equity.
Some Non-QM loans require larger down payments than traditional mortgages. Requirements may also differ for primary homes, second homes, and investment properties.
6. Property Requirements
The property you want to buy or refinance must meet the lender’s requirements.
Depending on the program, Non-QM loans may be available for primary homes, second homes, investment properties, single-family homes, multi-family properties, condos, and co-ops. Some programs also allow financing for condos and co-ops that don’t meet traditional mortgage guidelines.
Lenders may require an appraisal or additional building documents to confirm the property qualifies.
How Requirements Differ by Non-QM Loan Type
The documents you need depend on the type of Non-QM loan you apply for.
| Loan Type | Qualification Method | Common Borrower |
| Bank statement loan | Eligible personal or business cash flow | Self-employed borrower |
| Asset depletion loan | Eligible assets used to calculate income | High-net-worth or retired borrower |
| Profit and loss loan | Eligible business financial statements | Business owner |
| DSCR loan | Rental income relative to applicable property debt obligations | Real estate investor |
Documents Needed for a Non-QM Loan
The documents you need depend on the type of Non-QM loan you’re applying for and your financial situation.
Lenders may ask for:
- Government-issued ID
- Personal or business bank statements
- Profit and loss statements or other business records
- Tax returns or proof of employment, if required
- Investment and retirement account statements
- Information about your current debts
- Purchase agreement or property details
- Rental income records for investment properties
You may not need every document on this list. Your lender can tell you exactly which documents you’ll need based on your loan program.
Some no tax return mortgage programs allow borrowers to use bank statements, savings, or investments instead of tax returns to qualify.
How Does the Non-QM Loan Process Work?
The Non-QM loan process is similar to a traditional mortgage, but the documents and approval requirements may be different.
1. Review your finances. A mortgage expert looks at your income, savings, credit history, and property details to find possible loan options.
2. Choose a loan program. Your lender helps you find a Non-QM loan that fits your financial situation.
3. Submit your application. You’ll provide the financial documents and property information needed for your loan.
4. Complete underwriting. The lender reviews your application to make sure you meet the loan requirements. They may ask for additional documents.
5. Final approval and closing. Once all requirements are met and your loan is approved, you can move forward with closing.
The time it takes to get approved depends on the lender, loan program, and your financial situation. Loans with more complicated finances or property details may take longer to review.
Explore Non-QM Loans With GuardHill
GuardHill helps self-employed borrowers, real estate investors, and people with complex finances explore mortgage options that fit their needs.
Our mortgage experts can explain available Non-QM loan programs and help you understand what it takes to qualify.
Contact GuardHill to discuss your options.
Frequently Asked Questions
What credit score do you need for a Non-QM loan?
There is no set minimum credit score for all Non-QM loans. The score you need depends on the lender, loan program, loan amount, property type, and your financial situation.
Can you get a Non-QM loan without tax returns?
Yes. Some Non-QM loans let you use bank statements, savings, or investments instead of tax returns to qualify. However, lenders still need to review your finances before approving the loan.
Are Non-QM loans harder to qualify for than conventional mortgages?
Not always. Non-QM loans offer more flexible ways to qualify, but you still need to meet the lender’s requirements for credit, income, and property type. Some programs may also require a larger down payment or more savings.