Key Characteristics of Non-QM Mortgages:

  1. Flexible Criteria:

    • Income Verification: Non-QM loans often allow alternative methods for verifying income, such as bank statements, asset depletion, or profit and loss statements, rather than traditional tax returns and W-2 forms.

    • Credit Scores: They might be available to borrowers with lower credit scores or those with a limited credit history.

    • Debt-to-Income Ratio (DTI): Non-QM loans may accept higher DTIs compared to traditional qualified mortgages.

  2. Borrower Types:

    • Self-Employed Individuals: Those with irregular or seasonal income who might not have consistent pay stubs or tax returns to demonstrate their income.

    • Investors and Foreign Nationals: People who might have significant assets or income that doesn’t fit the conventional documentation requirements.

    • High Net-Worth Individuals: Borrowers with substantial assets but less traditional income sources.

  3. Loan Terms:

    • Interest Rates: Non-QM loans typically come with higher interest rates compared to qualified mortgages due to the increased risk to the lender.

    • Down Payments: They might require larger down payments to offset the higher risk.

    • Loan Features: These loans can include interest-only payments, balloon payments, and other non-traditional loan structures.

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