Non-QM Loans
Not every borrower fits traditional mortgage guidelines. That’s where Non-QM (non-qualified mortgage) loans come in. These loans are designed for creditworthy borrowers who need flexible qualification methods, such as self-employed individuals, investors, or those who’ve had recent credit events like bankruptcy or foreclosure.
Benefits of Non-QM Loans
- DSCR loan options for real estate investors that qualify based on rental income rather than personal income
- Expanded debt-to-income (DTI) ratios provide greater flexibility
- Bank statement programs for self-employed borrowers
- Shorter waiting periods following bankruptcy, foreclosure, or short sale
- Interest-only payment options for improved cash flow
- Alternative income documentation accepted
- Tailored solutions for unique borrower situations
Non-QM Loan Options with Watermark
Debt Service Coverage Ratio (DSCR)
Ideal for investors, DSCR loans qualify based on a property’s rental income covering the mortgage. No personal income documents are required.
Essentially, DSCR = property’s rental income ÷ mortgage payment (including taxes/insurance). If the ratio is ≥ 1.0, the property’s income covers the debt, which is what lenders typically look for in DSCR loans.
Bank Statement Mortgage Programs
Ideal for self-employed borrowers who don’t have traditional W-2 income. Instead of tax returns, we use 12–24 months of personal or business bank statements to calculate qualifying income.
Interest-Only Mortgage Options
For borrowers who prefer flexibility, interest-only loans allow for lower monthly payments during the initial term, giving you more control over cash flow.
Expanded DTI Ratios
Non-QM loans consider higher debt-to-income ratios than conventional loans, allowing you more purchasing power when other programs may not fit.
Credit Event Solutions
Life happens. If you’ve experienced a bankruptcy, foreclosure, or short sale, Non-QM programs may allow you to qualify much sooner than FHA, VA, or conventional guidelines.
Who Can Benefit from a Non-QM Loan?
- Self-employed professionals with strong income but complex tax returns
- Borrowers with recent credit events (bankruptcy, foreclosure, or short sale)
- Investors looking for interest-only or alternative financing options
- High-income earners with non-traditional income documentation
- Borrowers who don’t fit into standard agency or government loan guidelines
Non-QM Loan FAQs
Non-QM stands for “non-qualified mortgage.” These loans don’t meet the strict requirements set by Fannie Mae, Freddie Mac, or government agencies, but they’re designed for qualified borrowers with unique financial profiles.
Yes. Non-QM loans must still meet federal lending standards. They simply allow for alternative documentation and flexible underwriting.
Rates are generally higher than FHA, VA, or conventional loans, but they provide financing options for borrowers who would otherwise be ineligible.
Yes. Many Non-QM programs allow shorter waiting periods after bankruptcy, foreclosure, or short sale.
Yes. Non-QM programs often include options for investment properties, including debt-service coverage ratio (DSCR) loans.
Non-QM loans accept a range of alternative documentation to verify income and assets, including bank statements (12–24 months), 1099 forms for contractors, CPA-prepared profit & loss statements, asset depletion (using savings or retirement funds), rental income documentation (leases, property cash flow), and even DSCR (debt service coverage ratio simply measures whether a property’s rental income is enough to cover its mortgage payment including taxes and insurance) for investment properties. Depending on the program, CPA letters, business licenses, and Verification of Employment letters may also be used.
Get Started with a Watermark Non-QM Loan Today
At Watermark Home Loans, we specialize in helping unique borrowers find the right mortgage solution. Whether you’re self-employed, an investor, or someone looking for more flexible loan terms, our team can guide you through the Non-QM options available to you.
Questions? Call us at 800-896-9374
Non-QM loan terms, rates, and eligibility vary by borrower. Interest rates, APRs, and maximum loan amounts are subject to change without notice. Watermark Home Loans is an Equal Housing Lender.