Non-QM (non-qualified mortgage) loans don’t follow the standard rules that most mortgages must meet. They let lenders qualify borrowers in other ways: bank statements instead of tax returns, a rental’s income instead of yours, or large assets instead of a paycheck. They cost more, often 1 to 3 percentage points above conventional rates, and usually require 10% to 20% down or more.
Common types
| Type | Qualifies you on | Good fit for |
|---|---|---|
| Bank statement loan | 12 or 24 months of deposits, minus an expense factor | Self-employed borrowers with large write-offs |
| DSCR loan | The rental property’s rent vs. its payment | Real estate investors |
| Asset depletion | Savings and investments spread over a set period | Retirees and people with assets but little income |
| 1099 loan | 1099 income without full tax returns | Contractors and gig workers |
| Recent credit event | Standard income, shorter waiting period after bankruptcy or foreclosure | Borrowers who can’t wait out standard periods |
| Interest-only | Standard or alternative income | Borrowers who want lower early payments |
The trade-offs
- Higher rates and fees.
- Larger down payments and reserve requirements.
- Prepayment penalties are common, especially on investor loans; see prepayment penalties.
- Fewer consumer protections than qualified mortgages in some respects; read the terms carefully.
Try conventional first
Non-QM makes sense when you truly can’t qualify for a conventional, FHA or VA loan. Self-employed borrowers should first check their qualifying income with the self-employed income calculator; it may be higher than expected after add-backs. See getting a mortgage when self-employed.
Plan an exit
Many borrowers use non-QM as a bridge, refinancing into a conventional loan once their tax returns or credit history qualify. Watch for prepayment penalties that would make an early refinance costly, and compare offers with compare mortgage offers.
Common questions
What is a non-QM loan?
A mortgage that doesn’t meet the qualified mortgage rules, allowing alternative ways to qualify such as bank statements or rental income.
Are non-QM loans more expensive?
Yes, often 1 to 3 percentage points higher than conventional rates, with larger down payments.
Can I refinance out of a non-QM loan later?
Often, once you qualify for a conventional loan, but check for prepayment penalties first.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.