Mortgage guides
Plain-English guides to qualifying when you're self-employed or investing, what these loans cost, what documents you'll need and how they compare with a conventional loan.
Which home loan is right for me?The right home loan depends on a few things about you: your credit, how much you can put down, how you earn your income, whether you served in the military, and how you'll use the home. Most buyers end up choosing between a conventional loan and an FHA loan, while veterans often look at VA loans and self-employed borrowers and investors sometimes need a different kind of program.
What is a non-QM loan?A non-QM loan is a mortgage that does not meet the Consumer Financial Protection Bureau's Qualified Mortgage (QM) definition. Lenders must still verify that you can repay, but they may use bank statements, assets, rental income, or other alternative documentation instead of tax returns. Non-QM loans usually cost more than conventional loans in exchange for that flexibility.
Non-QM vs conventional loans: how they compareThe main difference between non-QM (non-qualified mortgage) vs conventional loans is how you qualify. Conventional loans follow standardized guidelines and verify income with tax returns and W-2s, usually at a lower rate. Non-QM loans fall outside the federal Qualified Mortgage rules and accept alternative documentation such as bank statements, assets, or rental income, usually at a higher cost.
Self-employed mortgage guide: how to qualify on your real incomeA self-employed mortgage is a home loan for business owners, freelancers, and contractors. You can qualify with tax returns through a conventional loan, or, if deductions make your taxable income look low, through a non-qualified mortgage (non-QM) program that measures income from bank statements, a profit and loss statement prepared by a certified public accountant (CPA), Form 1099 earnings, or assets.
DSCR ratio explained: the formula, an example, and what lenders look forThe DSCR ratio, or debt service coverage ratio, compares a rental property's gross monthly rent with its monthly housing payment of principal, interest, taxes, insurance, and homeowners association dues (PITIA). Divide rent by PITIA: a result above 1.0 means the rent covers the payment. DSCR loans use this ratio to qualify investment properties without personal income documents.
Non-QM document checklist, organized by programA non-QM (non-qualified mortgage) document checklist has two parts: core items almost every lender asks for, such as identification, credit authorization, and asset statements, and program-specific items that prove income or cash flow another way. Bank statement loans use 12 or 24 months of statements, DSCR (debt service coverage ratio) loans use a lease and appraisal rent schedule, and asset depletion loans use account statements.
Non-QM loan costs and tradeoffs: what to expect and how to compare offersNon-QM (non-qualified mortgage) loan costs are usually higher than conventional loan costs. Expect a higher interest rate and possibly a larger down payment, more cash reserves, and a prepayment penalty, especially on investor loans. In exchange you can qualify with alternative documentation. Compare offers side by side using the Loan Estimate, focusing on loan terms, closing costs, and annual percentage rate (APR).