Question 1

What is a Non-QM mortgage loan?

Accepted Answer

A Non-QM (non-qualified mortgage) loan is a home loan that does not meet the Consumer Financial Protection Bureau's Qualified Mortgage (QM) safe-harbor rules. Non-QM lenders use alternative documentation and underwriting methods—such as bank statements, asset depletion, or rental income—to evaluate a borrower's ability to repay. These programs serve borrowers who are creditworthy but do not fit conventional agency guidelines, including self-employed professionals, real estate investors, and foreign nationals. Non-QM loans are fully documented, legally originated mortgages offered by licensed lenders nationwide.

Question 2

Who qualifies for a Non-QM loan?

Accepted Answer

Non-QM loans are designed for borrowers who cannot qualify under standard QM guidelines but can demonstrate repayment ability through alternative means. Common profiles include self-employed business owners with strong cash flow but low taxable income, real estate investors purchasing rental properties, borrowers with recent credit events, and foreign nationals using ITIN or passport documentation. Most programs require a minimum credit score between 620 and 680, a down payment of 10–25%, and documented reserves. Lenders evaluate each file individually rather than applying rigid debt-to-income caps.

Question 3

What is the difference between a QM and Non-QM loan?

Accepted Answer

A Qualified Mortgage (QM) must meet strict CFPB underwriting standards, including a maximum 43% debt-to-income ratio, standardized income documentation (W-2s and tax returns), and limits on points and fees. Non-QM loans operate outside those rules and allow flexible income verification, higher DTI ratios, interest-only payment options, and shorter seasoning after major credit events. QM loans typically offer lower rates because they carry legal safe-harbor protections for lenders. Non-QM rates are generally 0.5–2.0% higher but provide access to financing that agency programs deny.

Question 4

What credit score do I need for a Non-QM loan?

Accepted Answer

Most Non-QM lenders require a minimum FICO score between 620 and 680, depending on the program and loan purpose. DSCR investment loans often accept scores as low as 620 when the property cash-flows strongly. Bank statement and full-documentation Non-QM programs typically require 660–680 for the best pricing. Scores below 620 are uncommon but may qualify through niche subprime Non-QM channels with larger down payments and higher reserves. Credit score is one factor; lenders also weigh down payment, reserves, property type, and overall file strength.

Question 5

Can self-employed borrowers get a Non-QM mortgage?

Accepted Answer

Yes. Self-employed borrowers are one of the primary audiences for Non-QM lending. Bank statement programs qualify income using 12 or 24 months of personal or business deposit activity instead of tax returns, which often understate true earnings due to write-offs. Asset depletion programs convert liquid assets into a monthly income figure for borrowers with substantial savings but minimal reported income. Sole proprietors, LLC owners, S-corps, and 1099 contractors across New Jersey and New York regularly close Non-QM loans through these alternative documentation paths.

Question 6

What is a DSCR loan and how does it work?

Accepted Answer

A DSCR (Debt Service Coverage Ratio) loan qualifies an investment property based on its rental income rather than the borrower's personal income. The lender calculates DSCR by dividing the property's gross or net operating income by the full monthly PITIA payment (principal, interest, taxes, insurance, and association dues). A ratio of 1.0 means the rent covers the payment; most programs require 1.0–1.25 minimum. DSCR loans do not require W-2s, tax returns, or employment verification, making them standard for portfolio investors acquiring rentals in markets like Union County, Elizabeth, and across the New York metro.

Question 7

What is a bank statement mortgage loan?

Accepted Answer

A bank statement mortgage is a Non-QM program that verifies income using 12 or 24 months of personal or business bank statements instead of tax returns. The lender totals eligible deposits, applies an expense factor (typically 50% for business accounts), and divides by the number of months to arrive at monthly qualifying income. Transfers between the borrower's own accounts, one-time deposits, and non-business inflows are excluded from the calculation. Bank statement loans are widely used by self-employed borrowers in New Jersey and New York who have strong deposit history but low net income on filed returns.

Question 8

Can I get a Non-QM loan after a foreclosure or bankruptcy?

Accepted Answer

Yes. Non-QM lenders offer programs with shorter waiting periods after foreclosure, short sale, or bankruptcy compared to conventional and FHA guidelines. Many Non-QM programs allow financing one day after a completed Chapter 13 discharge, 24 months after Chapter 7 bankruptcy, and 24–36 months after foreclosure depending on the investor and down payment. Borrowers must demonstrate re-established credit, stable income or rental cash flow, and adequate reserves. The trade-off is typically a higher rate and larger down payment than agency financing.

Question 9

Are Non-QM loans available in New Jersey and New York?

Accepted Answer

Yes. Non-QM loans are available throughout New Jersey and New York, including Union County municipalities such as Elizabeth, Cranford, Westfield, Summit, Linden, and Rahway. Licensed Non-QM lenders originate DSCR, bank statement, ITIN, and asset-based programs in both states without geographic restrictions on most product lines. New Jersey's mix of transit-linked rentals, suburban single-family homes, and investor activity in Hudson and Essex counties makes it a strong Non-QM market. New York borrowers—including those in the five boroughs, Long Island, and Westchester—access the same national Non-QM investor channels.

Question 10

How do I apply for a Non-QM mortgage with New American Funding?

Accepted Answer

To apply for a Non-QM mortgage with New American Funding, contact loan officer Michael Vrlaku (NMLS #179115), who specializes in DSCR, bank statement, and specialty Non-QM programs for borrowers in New Jersey, New York, and nationwide. The process begins with a brief intake to match your profile to the right program, followed by document collection (bank statements, lease agreements, or asset statements depending on the path). New American Funding offers pre-approval in as little as one hour for qualified files. You can start through NonQMAnswers by visiting the pre-approval link or submitting a lead form on the site.

Question 11

Can I use a DSCR loan on a property with a vacant unit?

Accepted Answer

Yes, in many cases—but the vacant unit cannot count toward qualifying rent. Lenders typically underwrite only documented, market-rate income from occupied units (leases) or a licensed appraiser’s rent schedule. If one unit is vacant on a 2–4 family, your DSCR is calculated on occupied income only, which may push the ratio below program minimums until the unit is leased.

Question 12

Do DSCR lenders accept Airbnb or short-term rental income?

Accepted Answer

A growing number of Non-QM investors accept STR income, but documentation is stricter than long-term leases. Expect to provide 12 months of platform statements, an STR revenue pro forma, or a short-term rent estimate from the appraiser. Many programs haircut STR projections by 10–25% compared to gross bookings to account for seasonality and turnover.

Question 13

What is the minimum DSCR ratio most lenders require in 2026?

Accepted Answer

The industry floor for most DSCR programs remains 1.00—meaning the property’s net operating income must at least equal the full PITIA payment. Scores of 1.20–1.25+ often unlock better pricing and higher LTV. Below 1.0, the deal does not cash-flow under standard DSCR guidelines and is typically declined unless a rare exception program applies.

Question 14

Can I close a DSCR loan in my LLC instead of my personal name?

Accepted Answer

Most DSCR programs allow vesting in a single-purpose LLC, especially for investment properties. You will still sign a personal guarantee in almost all cases. The LLC must be formed before closing, and lenders may require an operating agreement and EIN. This is standard for portfolio investors scaling beyond 5–10 doors.

Question 15

Can I do a cash-out refinance with a DSCR loan?

Accepted Answer

Yes. DSCR cash-out refinances are widely available on stabilized rentals with 6–12 months seasoning, though maximum LTV is usually lower than on a purchase—often 70–75% for cash-out versus up to 80% on acquisition. Proceeds are commonly used to fund the next acquisition or renovate a value-add unit without documenting personal income.

Question 16

Do you use gross or net deposits for a bank statement loan?

Accepted Answer

Lenders start with gross eligible deposits—the total of qualifying inflows over 12 or 24 months—then apply an expense factor (often 50% for business accounts, sometimes lower for sole proprietors with documented low overhead). Net qualifying income is gross deposits minus that factor, divided by the number of months. Transfers between your own accounts and one-time spikes are excluded.

Question 17

Can I combine personal and business bank statements?

Accepted Answer

Generally no—you must choose either personal or business statements for the full lookback period. Mixing accounts creates audit risk and double-counting. If you run expenses through a personal account, a personal bank statement program with a higher expense factor may still be the cleaner path. Your loan officer will model both scenarios before you submit.

Question 18

Is a 12-month or 24-month bank statement lookback better?

Accepted Answer

Twelve months is faster and works when recent income is stable or rising. Twenty-four months helps if your most recent year was an anomaly—high growth, a slow quarter, or a one-time contract. Lenders often average the net monthly figure across the full period, so a strong prior year can offset a soft current quarter when you use 24 months.

Question 19

Will I still need to provide tax returns on a bank statement loan?

Accepted Answer

Most bank statement Non-QM programs do not require personal tax returns for income qualification. You will still sign IRS Form 4506-C for fraud prevention, and lenders may request returns if deposits clearly contradict filed AGI. The product is built for borrowers whose tax returns understate true cash flow due to depreciation, write-offs, or pass-through losses.

Question 20

Can a CPA profit & loss statement replace bank statements?

Accepted Answer

Some lenders offer a P&L-only program with a CPA-prepared statement covering 12 months, but it is a separate product—not a substitute within a standard bank statement guideline. P&L programs often cap LTV lower and require the CPA to hold an active license and sign a certification. Bank statements remain the most flexible option for self-employed borrowers.

Question 21

Can I buy a U.S. property with an ITIN but no U.S. credit score?

Accepted Answer

Yes. ITIN programs are designed for borrowers who file U.S. taxes but lack a traditional FICO score. Lenders rely on alternative credit—rent history, utility bills, or foreign credit translated via a recognized vendor—plus larger down payments, often 20–25% minimum. ITIN must be active and match IRS records; expired or pending ITINs will not qualify.

Question 22

Are ITIN loans available on investment properties or only primary homes?

Accepted Answer

Both exist, but investor ITIN financing is a smaller, more specialized market. Primary residence ITIN loans are more common with full-doc or bank statement hybrids. Investment properties may require DSCR-style qualification on rents, higher reserves (6–12 months PITIA), and lower LTV caps. Always confirm occupancy and visa/ residency status with your lender upfront.

Question 23

What is the difference between an ITIN loan and a foreign national loan?

Accepted Answer

An ITIN loan serves borrowers who pay U.S. taxes and hold a valid Individual Taxpayer Identification Number but may not have an SSN. A foreign national loan targets non-resident buyers with no U.S. tax filing obligation, typically for investment property only, with 30–40% down and no U.S. credit requirement. Documentation and reserve rules differ materially between the two.

Question 24

Can gift funds from overseas be used for a foreign national down payment?

Accepted Answer

Yes, with full paper trail. Expect to wire from a documented source, provide a gift letter, and show the donor’s relationship to you. Lenders scrutinize international gifts for AML compliance—sudden large transfers without history may delay closing. Work with your loan officer before moving funds so the sourcing narrative matches underwriting expectations.

Question 25

If I obtain an SSN later, can I refinance out of an ITIN mortgage?

Accepted Answer

Absolutely. Many ITIN borrowers refinance into conventional or agency products once they have 24 months of U.S. credit history and a valid SSN. Plan for seasoning: pay on time, keep utilization low, and retain the same property address when possible. A refinance also lets you drop rate overlays common on ITIN initial pricing.

Non-QM FAQ

Non-QM Fundamentals

Program & Tool FAQs

Non-QM FAQ

Non-QM Fundamentals

Program & Tool FAQs