How to Apply For a Non-qualified Mortgage

How to Apply For a Non-qualified Mortgage. Dreaming of homeownership but facing hurdles with qualifying for a traditional mortgage? Don’t despair! Non-qualified mortgages (non-QM loans) offer an alternative path to unlocking your dream. These loans cater to individuals who might not meet the standard income, credit score, or employment history requirements set by conventional lenders.

How to Apply For a Non-qualified Mortgage

Whether you’re self-employed, have recent credit blemishes, or possess alternative income sources, non-QM loans can bridge the gap. This guide will delve into the intricacies of applying for a non-QM mortgage, empowering you with the knowledge to navigate this unique lending option. We’ll explore eligibility criteria, application processes, potential benefits and drawbacks, and equip you with the information to make informed decisions about your homeownership journey. So, buckle up and get ready to discover if a non-QM loan can pave the way to your own piece of the American dream.

Types of non-QM mortgages

Here are the different types of non-QM mortgages:

Bank statement loans

These loans allow you to qualify for a mortgage based on your bank statements, instead of your tax returns. This can be helpful if you are self-employed or have irregular income.

Asset-based loans

These loans allow you to qualify for a mortgage based on the value of your assets, such as your investment accounts or retirement savings. This can be helpful if you have a high net worth but your income is lower.

DSCR loans

These loans allow you to qualify for a mortgage based on the cash flow generated by your rental properties. This can be helpful if you are an investor or own multiple properties.

Non-prime loans

These loans are available to borrowers with lower credit scores, typically below 660. However, they typically have higher interest rates and fees than other types of non-QM loans.

Foreign national loans

These loans are available to foreign nationals who want to buy property in the United States. They typically require a larger down payment and have higher interest rates than other types of non-QM loans.

USDA loans

These loans are available to borrowers in rural areas and require no down payment. However, they have income limits and are only available for certain types of properties.

It is important to note that non-QM loans typically have higher interest rates and fees than traditional mortgages. You should carefully consider your options and shop around for the best rates and terms before applying for a non-QM loan.

Eligibility for non-QM loans

While traditional mortgages often have strict eligibility requirements, non-QM loans offer a more flexible path to homeownership for those who fall outside the standard criteria. Understanding the specific eligibility requirements for various non-QM loan types is crucial for tailoring your application strategy and maximizing your chances of success.

General Eligibility:

  • Credit Score: Minimums vary depending on the loan type, but generally range from 620 to 660. Some non-prime loans cater to even lower scores, but expect higher interest rates.
  • Debt-to-Income Ratio (DTI): Acceptable ratios can be higher than traditional loans, reaching up to 50% in some cases.
  • Employment: While stable employment history is preferred, some lenders consider alternative income sources like bank statements or investment income.
  • Down Payment: Varies by program, but typically requires a larger down payment compared to conventional loans to offset the perceived higher risk.

Eligibility by Loan Type:

  • Bank statement loans: Often require 12-24 months of consistent bank statements demonstrating sufficient income.
  • Asset-based loans: Focus on your overall net worth, including investment accounts, retirement savings, and real estate holdings.
  • DSCR loans: Primarily assess the rental income generated by your investment properties to determine affordability.
  • Non-prime loans: More lenient on credit score but require strong compensating factors like high income or significant assets.
  • Foreign national loans: May have additional requirements like proof of visa status and employment in the US.
  • USDA loans: Have income limits and property location restrictions specific to rural areas.

Remember, eligibility is not a guarantee. Each lender has its own underwriting process and may consider various factors beyond the basic requirements. Consulting a qualified mortgage professional specializing in non-QM loans is highly recommended to assess your individual situation and determine the most suitable loan options for your circumstances.

Pros and cons of non-QM loans

While non-QM loans offer valuable alternatives for homeownership, understanding their advantages and disadvantages is crucial before diving in.


  • Wider eligibility: Open doors for self-employed individuals, those with irregular income, lower credit scores, or alternative income sources who might not qualify for traditional loans.
  • Flexible documentation: Some non-QM options require less documentation compared to traditional loans, streamlining the application process.
  • Down payment flexibility: Certain non-QM loans allow lower down payments than conventional mortgages, making them potentially more affordable for some borrowers.
  • Meeting specific needs: Specialized non-QM options like DSCR loans cater to unique borrowing scenarios like investment properties.


  • Higher interest rates and fees: Expect higher interest rates and upfront fees compared to traditional loans due to the increased risk for lenders.
  • Stricter terms: Some non-QM loans may have stricter prepayment penalties, shorter loan terms, or balloon payments requiring larger final payments.
  • Limited lender availability: Finding lenders offering non-QM loans often requires more effort compared to traditional mortgage options.
  • Greater default risk: The flexibility can come with downsides; borrowers should carefully assess their ability to repay before committing.
  • Less consumer protection: Some non-QM loans might not qualify for certain consumer protections offered by traditional mortgages.

Ultimately, the decision to pursue a non-QM loan depends on your individual circumstances and financial goals. Carefully weigh the pros and cons, compare offerings from multiple lenders, and consult with a qualified mortgage professional to ensure you make an informed and responsible choice for your unique situation.

Application Process

Once you’ve weighed the pros and cons and determined a non-QM loan might be the right fit, understanding the application process is crucial. Here’s a general overview:

1. Pre-qualification:

  • Connect with a mortgage professional: Seek someone experienced in non-QM loans. They can guide you through options and assess your eligibility for specific types.
  • Gather initial documentation: Prepare basic documents like pay stubs, bank statements, tax returns, and proof of employment/ income sources.
  • Discuss your financial situation: Share your credit score, debt-to-income ratio, and desired loan amount to receive a pre-qualification letter estimating eligibility and potential loan terms.

2. Formal Application:

  • Choose a lender: Compare interest rates, fees, and terms offered by different lenders specializing in non-QM loans. Select one based on your needs and their offerings.
  • Submit a formal application: This typically involves providing detailed financial information, tax returns, bank statements, and asset documentation depending on the loan type.
  • Underwriting: The lender thoroughly assesses your financial health, income stability, and ability to repay the loan. This might involve additional documentation requests or verification steps.

3. Approval and Closing:

  • Loan approval: Upon successful underwriting, you’ll receive a loan approval with final terms outlining the interest rate, loan amount, and repayment schedule.
  • Closing documents: Review and sign closing documents, including the loan agreement, title insurance, and other legal forms.
  • Funding and Homeownership: Once all is finalized, the loan funds and you officially become a homeowner!

By understanding the application process and its nuances, you can navigate the path to non-QM homeownership with greater clarity and confidence.

Choosing the Right Lender

Selecting the right lender for your non-QM mortgage is critical, as it can significantly impact your loan terms, interest rates, and overall experience. Here are some key steps to guide you in making the best choice:

1. Assess your specific needs:

  • Identify the type of non-QM loan you require: Bank statement, asset-based, DSCR, non-prime, etc.
  • Understand your preferred loan terms: Interest rate range, down payment amount, loan duration, prepayment penalties, etc.
  • Know your credit score and financial situation: This will help narrow down suitable lenders and loan options.

2. Research and compare lenders:

  • Utilize online resources: Look for websites with comprehensive lender comparisons specifically for non-QM loans. Consider factors like interest rates, fees, loan types offered, borrower eligibility, and customer reviews.
  • Reach out to mortgage brokers: Brokers work with various lenders and can offer tailored recommendations based on your needs. Many specialize in non-QM loans and can provide valuable insights.
  • Contact individual lenders directly: Visit their websites and inquire about their non-QM programs, eligibility criteria, and current rates.

3. Evaluate individual lenders based on:

  • Experience with non-QM loans: Look for lenders with a proven track record and expertise in your specific loan type.
  • Transparency and communication: Ensure the lender clearly explains loan terms, fees, and the overall process.
  • Flexibility and customer service: Assess the lender’s willingness to work with your unique situation and offer personalized solutions.
  • Reputation and licensing: Verify the lender’s licensing and accreditation, and check for any complaints or negative reviews.
  • Pre-qualification options: Many lenders offer free pre-qualification to estimate your eligibility and loan terms without impacting your credit score.

Best lenders for non-QM mortgages

some of the top contenders in the non-QM mortgage space, along with key factors to consider when making your choice:

Top contenders in the non-QM mortgage space:

Deephaven Mortgage

Known for its innovative approach and focus on non-QM loans, Deephaven offers a variety of options, including bank statement loans, asset-based loans, and DSCR loans.

Acra Lending

A major player in the non-QM space, Acra Lending specializes in bank statement loans, catering to borrowers with alternative income sources or those who are self-employed.

Fairway Independent Mortgage Corp

A large national lender with a strong non-QM program, Fairway offers a wide range of loan options, including non-prime, asset depletion, and foreign national loans.

Angel Oak Mortgage Solutions

A leading provider of non-QM loans, Angel Oak offers a variety of options, including jumbo loans, renovation loans, and investment property loans.

Athas Capital

Specializing in non-QM loans for high-net-worth individuals, Athas Capital offers asset-based loans and portfolio loans with flexible terms.

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