Non-QM Loans: Make the Numbers Work When Life Doesn't Fit a Box
Bank statements, asset depletion, and alternative income paths with clear explanations.
Non-QM Program Highlights
Flexible financing solutions for self-employed borrowers, investors, and those with non-traditional income
Bank Statement Loans
Credit Scores Starting at 640 | Up to 90% LTV*
- •Loans up to $4 million, with a minimum of $150,000
- •12 or 24 months' business or personal bank statements
- •Up to 85% on second homes and investment properties
- •Two years self-employed required, or one year self-employed (same line of work)
- •Two years' seasoning from foreclosure, short sale, bankruptcy, or deed-in-lieu
- •Profit and loss (P&L) and 1099 options available
Bank Statement HELOC
Credit Scores Starting at 660 | Up to 90% CLTV*
- •Loans up to $750,000 (business) and $500,000 (personal with a 25-year)
- •Minimum of $125,000
- •Minimum initial draw 80%
- •Interest-only payments during draw period
- •Owner-occupied, second homes, and investment properties
- •No restrictions on how funds can be used
Portfolio Select
Credit Scores Starting at 640 | Up to 85% LTV
- •Loans up to $2.5 million, with a minimum of $125,000
- •One year seasoning for foreclosure, short sale, or deed-in-lieu
- •Two years' seasoning for bankruptcy; can use Chapter 13 filing date
- •Pricing based on primary wage earner's middle FICO score
- •Owner-occupied, second homes, and investment properties
- •Up to 50% DTI
Platinum Jumbo
Credit Scores Starting at 680 | Up to 90% LTV
- •Loans up to $4 million, with a minimum of $150,000
- •Four years' seasoning for foreclosure, short sale, bankruptcy, or deed-in-lieu
- •Owner-occupied, second homes, and investment properties
- •Pricing based on primary wage earner's middle FICO score, Full doc only
- •Full doc only
Foreign National Mortgage
No Foreign/U.S. Credit Needed | Up to 70% LTV
- •Loans up to $1.5 million, with a minimum of $100,000
- •DSCR program with a 1:1 ratio on cash flow
- •Cannot reside in the United States
- •Closing in a U.S. LLC entity permitted
- •12 months' reserves required and can remain in a borrower's home country
- •Investment property only
DSCR Loans
Credit Scores Starting at 680 | Up to 85% LTV*
- •Loans up to $3 million, with a minimum of $100,000
- •Short-term rentals allowed (AirDNA reports accepted)
- •DSCR < 1.0 and no DSCR options available
- •No income or employment required; qualifications based on property cash flow
- •No limit on total number of financed properties a borrower can own
- •Properties can vest title in LLC, S corp, C corp, or revocable trusts
- •Interest-only available; gift funds okay
- •Up to 6% seller concessions
- •Warrantable, non-warrantable, and condo hotels allowed
Closed-End Second Loans
Credit Scores Starting at 700 | Up to 85% CLTV
- •Loans up to $750,000, with a minimum of $50,000
- •Primary, second home, and investment properties
- •Full doc or business bank statements
- •Can never have had a foreclosure, short sale, modification, or deed-in-lieu; 60 months' seasoning from bankruptcy required
- •Owner-occupied program is not available in TX
- •Program not available in TN
ITIN Mortgage Loan (+DACA)
Credit Scores Starting at 640 | Up to 80% LTV
- •Loans up to $750,000 for Purchase or Rate & Term, Cash-Out Refi Available: Up to $550,000 with 75% LTV and 680 FICO
- •Terms Available: 30-year or 15-year fixed
- •Primary home only (one unit only)
- •SFR, PUD, Townhomes, Duplexes, and Warrantable condos only (9 stories or less)
- •Up to 50% DTI
What Is a Non-QM Loan?
A Non-QM (Non-Qualified Mortgage) loan is a mortgage that doesn't meet the Consumer Financial Protection Bureau's "Qualified Mortgage" standards—but that doesn't mean it's risky or predatory. Non-QM loans are designed for creditworthy borrowers whose income, employment, or financial situation doesn't fit the rigid documentation requirements of conventional, FHA, or VA loans. These are legitimate, responsible mortgage products that use alternative methods to verify your ability to repay.
Common Non-QM scenarios include self-employed borrowers who write off significant business expenses (making their tax returns look lower than their actual cash flow), real estate investors with multiple properties, foreign nationals without U.S. credit history, borrowers with recent credit events (bankruptcy, foreclosure, short sale), and those with non-traditional income sources like 1099 contract work, investment income, or rental income from multiple properties.
Non-QM loans typically use bank statements (12 or 24 months) to calculate income, asset depletion (using your liquid assets to qualify), debt service coverage ratio (DSCR) for investment properties, or stated income with significant down payments. Interest rates are generally higher than conventional loans—typically 1-3% above conforming rates—because lenders are taking on additional risk without traditional income documentation. However, for borrowers who can't qualify any other way, Non-QM loans provide a legitimate path to homeownership or investment property financing.
Who Should Consider a Non-QM Loan?
Eligibility Snapshot
Quick overview of Non-QM loan requirements
Credit & Income
- Minimum Credit Score: Typically 600-660 (varies by program)
- Ideal Credit Score: 680+ for best rates and terms
- Income Documentation: Bank statements, asset depletion, DSCR, or alternative methods
- Debt-to-Income Ratio: Often higher than conventional (50-55%+)
Down Payment & Terms
- Minimum Down Payment: 10-20% (varies by program and risk profile)
- Maximum LTV: 80-90% (primary residence), 75-80% (investment)
- Reserves: 6-12 months PITI typically required
- Occupancy Types: Primary, second home, investment property
Understanding Rates, Fees & Costs
Non-QM loan interest rates are risk-based, meaning your rate depends on your credit score, down payment, loan-to-value ratio, property type, occupancy, and documentation method. Expect rates to be 1-3% higher than conventional conforming rates. For example, if conventional rates are at 7%, Non-QM rates might range from 8-10%. While this sounds expensive, remember that Non-QM loans provide access to financing when no other option exists—and you can always refinance to a conventional loan once your situation stabilizes.
Bank Statement Loans: These programs use 12 or 24 months of personal or business bank statements to calculate your income. Lenders typically use 50-75% of your average monthly deposits as qualifying income (to account for business expenses). The more months of statements you provide and the more consistent your deposits, the better your rate and terms.
Asset Depletion: If you have substantial liquid assets (stocks, bonds, retirement accounts), lenders can divide your total assets by 360 months (30 years) to create a monthly income figure for qualification. This works well for retirees or high-net-worth individuals with irregular income but significant savings.
Prepayment Penalties: Many Non-QM loans include prepayment penalties (typically 3-5 years) to protect the lender's investment. These penalties decrease over time and are often structured as 3-2-1 (3% in year one, 2% in year two, 1% in year three). Make sure you understand the prepayment terms before committing, especially if you plan to refinance soon.
How the Non-QM Loan Process Works
Consultation & Program Selection
1-2 daysWe'll review your income sources, assets, credit profile, and goals to determine which Non-QM program fits best. This might be bank statement, asset depletion, DSCR, or a hybrid approach.
Documentation & Pre-Approval
3-7 daysYou'll provide the required alternative documentation (bank statements, asset statements, etc.). We'll submit to underwriting for preliminary approval and issue a pre-approval letter.
Property Search & Appraisal
VariesOnce you're under contract, we'll order the appraisal. Non-QM appraisals are similar to conventional appraisals but may require additional scrutiny for investment properties or unique property types.
Underwriting & Conditional Approval
10-14 daysNon-QM underwriting is more manual and takes longer than conventional loans. The underwriter will verify your alternative documentation and may request additional clarification or supporting documents.
Clear to Close & Funding
3-5 daysOnce all conditions are satisfied, you'll receive final approval. Closing is similar to any other mortgage—you'll sign documents, wire funds, and receive the keys to your property.
Documents You'll Need
Alternative Income Documentation
- • 12 or 24 months personal/business bank statements
- • Asset statements (if using asset depletion)
- • Profit & Loss statement (current year)
- • Business license or proof of self-employment
- • CPA letter (if available)
Standard Documentation
- • Credit report (pulled by lender)
- • Government-issued photo ID
- • Proof of down payment funds
- • Proof of reserves (6-12 months PITI)
- • Purchase contract (once under contract)
Non-QM vs. Conventional vs. Bank Statement
| Feature | Non-QM (General) | Conventional | Bank Statement |
|---|---|---|---|
| Income Documentation | Alternative methods | W-2s, tax returns | 12-24 months bank statements |
| Minimum Credit Score | 600-660 | 620 (680+ ideal) | 660-680 |
| Minimum Down Payment | 10-20% | 3-5% | 10-15% |
| Interest Rates | 1-3% above conventional | Market rates | 1-2% above conventional |
| Prepayment Penalty | Often yes (3-5 years) | Rarely | Sometimes (1-3 years) |
| Best For | Complex income, recent credit events | Standard W-2 income | Self-employed with strong cash flow |
Not sure which program fits? Contact Dana for a personalized consultation.
Pro Tips & Common Mistakes
Plan your exit strategy. Non-QM loans are often a bridge to conventional financing. After 12-24 months of on-time payments and improved documentation, you can refinance to a conventional loan with a lower rate and no prepayment penalty.
Keep clean bank statements. If you're using bank statement qualification, avoid large unexplained deposits or transfers between accounts during the 12-24 month lookback period. Lenders will scrutinize unusual activity.
Common Mistake: Not understanding prepayment penalties. Many borrowers don't realize their Non-QM loan has a prepayment penalty until they try to refinance. Always ask about prepayment terms upfront and factor them into your decision.
Common Mistake: Assuming Non-QM is your only option. Many self-employed borrowers can qualify for conventional loans if they have two years of tax returns showing consistent income. Always explore conventional options first—they're cheaper.
Serving Non-QM Borrowers Across 10 States
Dana Peterson is licensed to originate Non-QM loans in Alabama, Arizona, Colorado, Florida, Idaho, Oklahoma, Pennsylvania, Tennessee, Virginia, and Washington. Non-QM lending is particularly popular in high-cost markets like Colorado and Washington where self-employed borrowers and real estate investors need flexible financing options. Florida's robust real estate investment market also drives significant Non-QM activity, especially for DSCR and bank statement loans.
Each state has unique considerations: Arizona and Florida have large populations of retirees using asset depletion, while Washington and Colorado see significant demand from tech entrepreneurs and gig economy workers. Our multi-state expertise ensures you're working with a lender who understands regional market dynamics and lender appetite for Non-QM products in your area.
Frequently Asked Questions
What credit score do I need for a Non-QM loan?
Most Non-QM programs require a minimum credit score of 600-660, though some programs accept scores as low as 580 with larger down payments. The higher your credit score, the better your rate and terms.
How do bank statement loans calculate income?
Lenders typically use 50-75% of your average monthly deposits over 12 or 24 months as qualifying income. The percentage depends on whether you're using personal or business bank statements and your business expense profile.
Can I avoid a prepayment penalty?
Some Non-QM programs offer no prepayment penalty, but they typically come with higher interest rates. Most borrowers accept a 3-5 year prepayment penalty in exchange for a lower rate, planning to refinance once their situation stabilizes.
How soon after bankruptcy can I get a Non-QM loan?
Many Non-QM programs allow financing as soon as 1-2 years after a Chapter 7 bankruptcy discharge or foreclosure, compared to 2-4 years for conventional loans. You'll need to demonstrate re-established credit and stable income.
What is asset depletion and how does it work?
Asset depletion allows you to qualify using your liquid assets (stocks, bonds, retirement accounts) instead of traditional income. Lenders divide your total assets by 360 months to create a monthly income figure for qualification purposes.
Can I use a Non-QM loan for investment property?
Yes! Non-QM loans are popular for investment properties, especially DSCR (Debt Service Coverage Ratio) loans that qualify based on the property's rental income rather than your personal income.
Are Non-QM loans safe and legitimate?
Yes. Non-QM loans are legitimate mortgage products offered by licensed lenders and regulated by state and federal authorities. They're not subprime loans—they're simply designed for borrowers who don't fit traditional qualification boxes.
When should I refinance from Non-QM to conventional?
Consider refinancing once you have 12-24 months of on-time payments, improved credit, and can document income through traditional methods (W-2s or tax returns). This will get you a lower rate and eliminate prepayment penalties.
What Our Clients Say
John Sarnecky
24 October 2025
Excellent service with West Capital Funding, Irvine California. Randy Mathis is at the top of the loan business. He saved us a lot of money by getting...
Kimberly Bell
24 October 2025
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22 October 2025
Jon was great to work with on the refi of our property. Our situation wasn't straightforward, but Jon listened to what we were looking for, was able t...
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22 October 2025
WCL is super easy to work with and has options that work for whatever your needs, and at whatever timing you need!
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22 October 2025
Sean and his team, Ryan are the kindest communicators. It wasn't checking boxes on next steps, it was from the perspective of the loan applicant that...
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21 October 2025
Austin was able to help me with both a refi and a HELOC. We did the refi on our primary to lower the rate and then we got cash out from our investment...
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21 October 2025
I'm so happy and grateful to have found someone like Robert Martin, who guided me through this entire process. This was something completely foreign t...
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20 October 2025
I had the absolute pleasure of working with Aaron Beck on the purchase of my home, and I can't recommend him highly enough. From start to finish, Aaro...
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19 October 2025
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19 October 2025
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17 October 2025
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17 October 2025
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16 October 2025
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Ready to Explore Non-QM Loan Options?
Let's discuss your unique situation and find the right Non-QM program for your needs. Get your personalized consultation today.
This is not a commitment to lend. All loans subject to credit approval and underwriting guidelines.
West Capital Lending is an Equal Housing Lender. This is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines, and acceptable collateral. Interest rates, terms, and program availability may change without notice. Not all applicants will qualify. Information is for educational purposes only and is not financial or legal advice.
Company NMLS: 1566096 | MLO NMLS: 173133 (Dana Peterson)
Address: 24 Executive Park, STE 250, Irvine, CA 92614
Licensed in: AL, AZ, CO, FL, ID, OK, PA, TN, VA, WA