Non-QM Loan Programs 2026: Complete Guide to 7 Non-Traditional Mortgage Types

What Are Non-QM Loan Programs?

The Consumer Financial Protection Bureau (CFPB) established Qualified Mortgage (QM) standards under the Ability-to-Repay (ATR) rule following the 2008 financial crisis. QM loans must meet specific criteria: full income documentation through tax returns and W-2s, a maximum 43% debt-to-income ratio, no interest-only periods, no negative amortization, and loan terms of 30 years or less. Lenders who originate QM loans receive legal safe harbor protection from borrower lawsuits.

Non-QM loans are any residential mortgage that does not meet one or more QM standards. This does not mean they are unregulated or irresponsible. Every non-QM loan still requires the lender to document the borrower's ability to repay — the documentation method simply differs from the standard QM approach. Non-QM lenders use alternative verification methods such as bank deposits, rental income, liquid assets, or foreign income documentation to establish repayment capacity.

Non-QM loans exist because the QM framework, while protective, excludes millions of creditworthy borrowers. The CFPB's ATR/QM rule was designed for traditional W-2 employees. Self-employed professionals, investors, retirees, and foreign nationals fall outside these parameters despite having strong financial profiles.

Non-QM Loan Types and Requirements 2026

Seven primary non-QM program categories serve distinct borrower populations. Each program uses a different qualification methodology, targets different property types, and carries unique documentation requirements. Understanding which program matches your financial situation is the first step toward choosing the right non-QM mortgage.

1. Bank Statement Loans

Bank statement loans qualify self-employed borrowers using 12 to 24 months of bank deposits instead of tax returns. The lender calculates qualifying income by averaging monthly deposits and applying an expense factor (typically 50% for business accounts, lower for personal accounts). This program exists because self-employed borrowers often reinvest profits, take legitimate deductions, and structure businesses in ways that reduce taxable income below their actual earning capacity.

• Documentation: 12 or 24 months of personal or business bank statements
• Self-employment: Minimum 2 years self-employed (verified by CPA letter, business license, or LLC filing)
• Loan amounts: $100,000 to $3 million+ depending on lender
• LTV: Up to 90% (10% minimum down payment)

Read the complete bank statement loans guide for detailed qualification strategies.

2. DSCR Investment Property Loans

DSCR (Debt Service Coverage Ratio) loans qualify investment properties based on rental income versus the mortgage payment. If a property generates $2,500 monthly rent against a $2,000 mortgage payment, the DSCR is 1.25 — meaning rental income exceeds the debt obligation by 25%. No personal income verification, no W-2s, no tax returns, and no DTI calculation required.

• Documentation: Lease agreements, appraisal with rental analysis, entity documentation
• DSCR requirement: Typically 1.0 to 1.25 minimum (some lenders allow 0.75 with compensating factors)
• Loan amounts: $100,000 to $5 million+ per property
• Property limit: No cap on total financed properties with most lenders

Explore the DSCR loans guide for investors for ratio calculations and portfolio scaling strategies.

3. Asset Depletion / Asset Qualification Loans

Asset depletion loans create qualifying income from liquid assets by dividing eligible assets by a set number of months (typically 60 to 360). A borrower with $2 million in liquid assets divided by 240 months produces $8,333 monthly qualifying income — regardless of employment status or reported income. This program serves retirees, early retirees, trust beneficiaries, and high-net-worth individuals.

• Documentation: Brokerage statements, bank statements, retirement account statements (60 to 90 days)
• Eligible assets: Checking, savings, investment accounts, retirement (often discounted 30-50%), cryptocurrency (select lenders)
• Minimum assets: Typically $500,000+ in eligible liquid assets after down payment
• LTV: Up to 80-85% depending on asset level and credit score

Read the asset depletion loans guide for calculation methods and lender comparison.

4. Interest-Only Mortgage Loans

Interest-only loans allow borrowers to pay only the interest portion of the mortgage for an initial period (typically 5 to 10 years), followed by fully amortizing payments. This structure reduces initial monthly payments significantly, making it attractive for high earners who want maximum cash flow flexibility, borrowers expecting income increases, or investors managing multiple properties.

• Documentation: Full documentation or combined with other non-QM programs (bank statement + interest-only)
• Interest-only period: 5, 7, or 10 years
• LTV: Up to 80% (20% minimum down payment)
• Qualification: Must qualify at fully amortized payment with some lenders

Explore the interest-only mortgage guide for payment comparison and cash flow analysis.

5. Foreign National Loans

Foreign national loans serve non-US citizens and non-permanent residents who want to purchase property in the United States. These borrowers typically lack a US credit history, US-based income, or a Social Security number. Lenders verify income through foreign bank statements, employment letters from international employers, or foreign tax returns, and establish creditworthiness through international credit reports or asset verification.

• Documentation: Passport, visa (if applicable), foreign income verification, foreign bank statements
• Credit: Foreign credit report, trade references, or asset-based qualification
• LTV: Up to 70-80% (20-30% down payment)
• Property types: Primary residence, second/vacation home, investment property

Read the foreign national mortgage guide for visa-specific requirements and documentation strategies.

6. Recent Credit Event Loans

Recent credit event programs serve borrowers who experienced a bankruptcy, foreclosure, short sale, or deed-in-lieu more recently than conventional waiting periods allow. Conventional loans require 2 to 7 year waiting periods after major credit events. Non-QM recent credit event loans reduce these waiting periods to as little as one day after discharge or completion, provided the borrower demonstrates financial recovery.

• Documentation: Full income documentation plus letter of explanation for credit event
• Waiting periods: As little as 1 day post-discharge (vs. 2-7 years conventional)
• Compensating factors: Higher down payments, cash reserves, re-established credit
• LTV: Up to 75-80% depending on time since event

7. Fix-and-Flip / Bridge Loans

Fix-and-flip loans provide short-term financing for property rehabilitation projects. These 6 to 18 month loans fund both the purchase price and renovation costs, with qualification based on the after-repair value (ARV) and the borrower's rehab experience. Bridge loans serve a similar short-term purpose for borrowers purchasing a new home before selling their current property.

• Documentation: Rehab budget/scope, contractor bids, borrower experience resume, ARV appraisal
• Term: 6 to 18 months (interest-only during rehab period)
• LTV: Up to 80-90% of purchase, 65-75% of ARV
• Draws: Renovation funds disbursed in phases based on inspection milestones

Read the fix-and-flip loans guide for project structuring and lender selection criteria.

Which Non-QM Loan Program Is Right for Your Situation?

Choosing the right non-QM program starts with understanding your borrower profile. After originating non-QM loans across all seven categories for borrowers throughout California and Washington, Mo Abdel uses a decision framework that matches financial situations to the optimal program type.

If you are self-employed and your tax returns understate your income: Bank statement loans are the primary solution. Business owners who reinvest profits, take Section 179 deductions, or depreciate assets often show low taxable income despite strong cash flow. Bank statement programs evaluate actual deposits rather than net income on Schedule C. A restaurant owner depositing $40,000 monthly but showing $60,000 annual net income on tax returns qualifies based on deposits, not the tax return figure.

If you are buying investment property and want to scale a portfolio: DSCR loans eliminate the biggest bottleneck for real estate investors — personal DTI limits. Once an investor owns four to five financed properties, their debt-to-income ratio on paper makes conventional qualification nearly impossible even with strong rental income. DSCR loans evaluate each property independently, allowing unlimited portfolio growth based on property cash flow.

If you are retired or have substantial assets without employment income: Asset depletion creates qualifying income from your wealth. Retirees with $1 million+ in liquid assets who haven't started Social Security, early retirees living off investment gains, or trust beneficiaries with distributed assets all qualify through this pathway.

If you want to maximize cash flow on a primary residence or investment: Interest-only programs reduce monthly payments during the initial period. A $1 million loan at interest-only saves approximately $1,500-$2,000 monthly compared to fully amortizing payments during the interest-only term. High earners expecting future income growth or investors optimizing cash flow across multiple properties benefit from this structure.

If you are a foreign national purchasing US property: Foreign national loans bridge the gap for buyers without a Social Security number, US credit history, or domestic income. These programs accept foreign income verification, international bank statements, and alternative credit documentation.

If you had a recent bankruptcy, foreclosure, or short sale: Recent credit event programs eliminate conventional waiting periods. Instead of waiting 2 to 7 years, qualified borrowers can purchase with compensating factors like larger down payments, cash reserves, and re-established credit lines.

If you are flipping houses or need short-term bridge financing: Fix-and-flip loans provide acquisition plus renovation financing with qualification based on the project's after-repair value rather than personal income. Experienced flippers access better terms and higher leverage.

How Do Non-QM Rates Compare to Conventional Loans in 2026?

Non-QM loans carry rate premiums above conventional mortgage rates because they are held in portfolio by private investors rather than sold to Fannie Mae or Freddie Mac. These premiums vary significantly by program type, borrower profile, and the wholesale lender selected.

Rate premiums reflect the perceived risk and documentation type of each program. Asset depletion loans for high-net-worth borrowers carry the smallest premiums (+0.5-1.25%) because the borrower's liquid wealth provides strong repayment assurance. Fix-and-flip loans carry the largest premiums (+3.0-5.0%) because they are short-term, project-dependent, and involve renovation risk.

Wholesale broker access directly reduces non-QM rate premiums. When a wholesale broker submits a non-QM loan scenario to 50+ lenders simultaneously, the competitive pressure produces pricing that a single retail bank relationship cannot match. In Mo Abdel's experience, wholesale non-QM rates consistently undercut retail non-QM pricing by 0.25% to 0.75% on identical borrower profiles.

The key variable borrowers control is documentation strength. A bank statement borrower with 24 months of statements, 740+ credit, and 25%+ down payment will receive meaningfully better pricing than a borrower with 12 months of statements, 660 credit, and 10% down. Every non-QM program rewards stronger compensating factors with reduced premiums.

Why Do Wholesale Brokers Dominate Non-QM Lending?

The structural advantage of wholesale brokers in non-QM lending is not marginal — it is decisive. According to the Mortgage Bankers Association, wholesale and correspondent channels originate approximately 70-80% of all non-QM volume nationally. The reasons are structural, not accidental.

Retail banks offer zero to two non-QM products. Major banks focus on qualified mortgages they can sell to Fannie Mae and Freddie Mac on the secondary market. Non-QM loans require private investor relationships, specialized underwriting expertise, and risk tolerance that most banks do not maintain. When a bank does offer a non-QM product, it is typically a single program (usually bank statement) with limited flexibility.

Wholesale brokers access 50+ dedicated non-QM lenders. These specialized lenders — companies like Angel Oak, Deephaven, A&D Mortgage, Newfi, and dozens more — build their entire business around non-QM origination. Each lender has different credit overlays, documentation requirements, pricing grids, and niche specialties. A broker matches the borrower to the lender whose guidelines produce the best approval and pricing.

Program stacking creates solutions that single lenders cannot offer. A borrower who needs a bank statement income calculation combined with interest-only payments on an investment property requires multiple non-QM features in one loan. Brokers identify which of their 50+ lenders allow program combinations that a single institution would not offer.

Learn more about the wholesale advantage in the mortgage broker vs. bank comparison guide.

What Are the Risks and Benefits of Non-QM Borrowing?

Benefits of Non-QM Loans

• Qualification flexibility: Income documentation matches your actual financial situation rather than forcing conventional standards
• Faster access to homeownership or investment: Eliminates multi-year waiting periods for credit events and removes conventional DTI barriers for investors
• Higher loan amounts: Many non-QM programs extend to $3-5 million+ versus conventional conforming limits
• Property type versatility: Non-warrantable condos, mixed-use properties, and unique property types that conventional lenders reject
• Portfolio building: DSCR loans remove the conventional limit of 10 financed properties per borrower
• Bridge strategy: Use non-QM now while building the documentation profile needed for future conventional refinancing

Risks and Considerations

• Higher interest rates: Rate premiums of 0.5% to 2.5% above conventional increase total borrowing cost over the loan term
• Larger down payments: Most non-QM programs require 10-30% down versus 3-5% for conventional loans
• Prepayment penalties: Many non-QM programs include 1 to 5 year prepayment penalty periods that restrict early payoff
• Limited lender selection: Without a wholesale broker, borrowers face severely restricted non-QM options
• Adjustable rate exposure: Some non-QM products are ARM-only, exposing borrowers to future rate adjustments
• Complexity: Non-QM underwriting requires a broker who understands each lender's specific guidelines and overlays

Non-QM Borrower Profile Matching Matrix

Use this matrix to identify which non-QM program aligns with your specific financial situation. Most borrowers match one primary program, though some qualify under multiple categories.

Non-QM Market Growth: 2020-2026

The non-QM market has expanded significantly since its pandemic-era contraction in 2020. Growth is driven by rising self-employment rates, investor demand for rental properties, and the growing recognition that QM standards exclude millions of creditworthy borrowers.

Six data points that define the 2026 non-QM landscape:

1. 34% of US workers are self-employed, independent contractors, or gig workers — up from 27% in 2020 (Bureau of Labor Statistics)
2. Non-QM origination volume is projected to reach $28-32 billion in 2026, a 4x recovery from the 2020 pandemic low
3. DSCR loans represent 40-45% of all non-QM volume, making investor lending the dominant non-QM category
4. Bank statement loans represent 25-30% of non-QM volume, reflecting persistent self-employment growth
5. Wholesale channels originate 70-80% of non-QM loans nationally versus 20-30% through retail bank channels
6. Average non-QM credit score is 720+, demonstrating these are creditworthy borrowers with non-traditional documentation, not subprime

People Also Ask About Non-QM Loans

Non-QM Loan Programs: Extended FAQ