Understanding Non-QM Loans

Non-qualified mortgages (non-QM) refer to loans that do not meet the standards set by government agencies or housing finance authorities, such as Fannie Mae or FHA. These loans are particularly relevant for self-employed borrowers or those with alternative income documentation that does not align with traditional W-2 income. For instance, self-employed individuals may have significant tax deductions that obscure their actual income, making them ineligible for standard loans. Non-QM loans offer creative solutions, such as utilizing bank statements for income verification, thereby expanding access for borrowers who would otherwise struggle to secure financing.