Non-QM Mortgages Guide 2025

KEY TAKEAWAYS

• Non-QM loans use bank statements, asset balances, or rental cash flow instead of strict tax-return income.
• Share of U.S. rate locks tagged “Non-QM” hit 7.4 % in June 2025, up from 5 % in 2024.
• Average 30-year fixed mortgage sits near 6.67 %; most Non-QM loans are priced 0.75%–1.5% higher, still well below hard-money rates.
  
• 35 % of U.S. workers now earn income outside traditional payroll fueling demand for alternative underwriting.
  
• TFG offers 10+ Non-QM programs, direct-lender pricing, and one-on-one guidance from our loan officers.

Introduction

Buying a home or rental property in today’s real estate market often feels like navigating a minefield of rigid requirements. Lenders typically demand W-2s, two years of tax returns, and proof of steady pay criteria that screen out a growing subset of borrowers.

Freelancers, consultants, small‐business owners, retirees living off dividends, and international investors all possess legitimate income streams yet lack the conventional paperwork to fit into a Qualified Mortgage (QM) box.

As a result, many are forced toward high-cost hard-money loans, payday lenders, or simply postponed homeownership dreams indefinitely.

Non-Qualified Mortgages (Non-QM) change that narrative. Instead of restricting qualification to narrow documentation channels, Non-QM programs assess the reality of your financial life.

At Truss Financial Group (TFG), we’ve built a suite of Non-QM solutions that honor diverse income sources bank statements, asset imputation, rental cash flow (DSCR), 1099 forms, and more while maintaining rigorous credit standards. Our Senior Loan Officers provide a white-glove experience, guiding you through every step and often closing loans in as few as 21 business days.

Here’s what you’ll find in this comprehensive guide:

1. The Rise of Non-QM Lending
   Trace the evolution from the 2008 mortgage crisis to today’s booming Non-QM market, including regulatory shifts and market data.
2. Understanding Non-QM Loans
   Learn definitions, core principles, key documentation types, and underwriting mechanics that differentiate Non-QM from other products.
3. Non-QM vs. Qualified Mortgage (QM)
   A detailed comparison chart and narrative on why Non-QM is essential for modern borrowers.
4. TFG’s Flagship Non-QM Programs
   Deep dives into our DSCR Loans, bank statement loans, and Asset-Based Loans with real-world case studies.
5. Complete Non-QM Menu
   Expanded coverage of eight additional specialized programs, each with eligibility, terms, and borrower profiles.
6. Applying for a Non-QM Mortgage
   Step-by-step application process, digital checklists, timeline expectations, and best-practice tips.
7. Case Studies & Borrower Profiles
   Four in-depth journeys showcasing how Non-QM empowers freelancers, retirees, international investors, and post-credit-event borrowers.
8. Advanced Strategies for Investors & High-Net-Worth Clients
   Portfolio-level tactics like blending programs, trust structures, and tax considerations.
9. Expanded FAQs
   Over 20 nuanced answers addressing edge cases on PMI, rate locks, co-borrowers, property types, and more.
10. Conclusion & Next Steps
    Key takeaways, TFG’s unique advantages, and how to kick off your application.

By the end of this guide, you’ll understand exactly how Non-QM loans function, why they matter in today’s diverse economy, and how TFG’s experts can navigate you to a successful closing often in just three weeks. Ready to replace frustration with clarity? Let’s begin.

1. The Rise of Non-QM Lending

1.1 Historical Context

In the aftermath of the 2008 financial crisis, the Consumer Financial Protection Bureau (CFPB) introduced the Qualified Mortgage (QM) rule to stem the tide of reckless lending. Under QM, lenders gained a “safe harbor” from Ability-to-Repay (ATR) litigation by following strict guidelines:

• Income documentation: Two years of tax returns or W-2s.
• Debt-to-income cap: Maximum 43% DTI.
• Term limits: 30-year amortization only; no interest-only or balloon payments.
• Fee restrictions: Points and fees capped at 3% of the loan amount.

These measures undeniably protected consumers and stabilized the market but at what cost? By prioritizing form over substance, QM rules shut out a growing class of borrowers whose real-world income profiles didn’t fit neatly into prescribed buckets.

Self-employed consultants deducting legitimate business expenses; rideshare drivers with strong cash flow but no W-2s; retirees drawing from investment dividends all found themselves edged toward high-cost, short-term solutions like hard-money loans or forced to delay homeownership altogether.

Enter Non-Qualified Mortgages (Non-QM). Lenders recognized that the core goal ensuring borrowers can repay could be met without rigid templates. They began to develop programs that honored the substance of a borrower’s financial strength rather than the form of their paperwork, preserving ATR integrity while expanding eligibility.

1.2 Why Non-QM Matters Today

Fast-forward to 2025, and the lending landscape looks dramatically different:

• Market share surge: Non-QM accounted for 7.4% of U.S. rate locks in June 2025 up from 5% in mid-2024.
• Gig-economy prevalence: 35% of American workers now earn significant income outside traditional payroll channels, a 12% jump since 2018.
• Competitive pricing: While conforming 30-year fixed mortgages hover around 6.67%, Non-QM rates typically span 6.25%–8.17%, still substantially below hard-money’s 10%+ range.

These figures tell a simple story: as the workforce diversifies, so too must mortgage products. Non-QM loans have emerged as essential tools for:

• Self-employed professionals: Agency principals, consultants, and creative entrepreneurs whose tax deductions obscure true earnings.
• Gig workers: Rideshare drivers, delivery couriers, and freelance designers who rely on platform payouts rather than employer payroll.
• Real-estate investors: BRRRR strategists and rental operators focused on property cash flow more than personal salary.
• Retirees & HNW clients: Individuals drawing from investment portfolios or retirement accounts, seeking liquidity without selling assets.
• Foreign nationals: International buyers lacking U.S. tax history but holding substantial overseas assets or rental income.

Non-QM’s flexibility bridges the gap between borrower reality and traditional underwriting, ensuring qualified individuals aren’t penalized by outdated rules.

1.3 Regulatory Overview

Non-QM loans still operate under the CFPB’s overarching Ability-to-Repay (ATR) mandate, which requires lenders to verify that borrowers can meet payment obligations through documented income, assets, and reserves.

However, unlike QM loans, which carry a built-in “safe harbor” or “rebuttable presumption” for certain borrowers. Non-QM products lack that legal shield. This absence places greater emphasis on lender diligence and transparent borrower disclosures.

Key regulatory considerations:

1. ATR compliance: Lenders must assess income, assets, debts, and credit history, regardless of documentation type.
2. Consumer protections: Non-QM borrowers enjoy the same Truth-In-Lending Act (TILA) disclosures, escrow requirements, and state-level anti-predatory statutes as QM borrowers.
3. No QM safe harbor: Lenders assume increased liability if ATR standards aren’t met. Partnering with reputable institutions like TFG, which follows stringent internal guidelines mitigates risk for both parties.

By maintaining robust underwriting practices, transparent fee schedules, and dedicated Loan Officer support, TFG ensures Non-QM borrowers receive all the consumer safeguards they deserve, without sacrificing access to financing.

 

2. Understanding Non-QM Loans

Navigating Non-QM mortgages begins with grasping their core philosophy: verify a borrower’s ability to repay using flexible documentation rather than rigid, one-size-fits-all guidelines. In practice, this means accepting a broader range of income evidence, stress-testing cash flows, and tailoring underwriting to each borrower’s unique financial profile.

2.1 Definition and Core Principles 

A Non-Qualified Mortgage is any mortgage that meets the CFPB’s Ability-to-Repay (ATR) rule but falls outside the CFPB’s Qualified Mortgage (QM) definition. The ATR rule requires lenders to document:

1. Income and Assets: How much money you earn and hold in reserves.
2. Debt Obligations: Existing loans, credit cards, and other payment commitments.
3. Credit History: FICO score, past delinquencies, and payment performance.
4. Debt-to-Income Ratio (DTI): A borrower’s monthly debts divided by gross monthly income though Non-QM programs may stress DTI differently.

Unlike QM, a framework that demands W-2s/tax returns, caps DTI at 43%, and disallows interest-only or negative amortization, Non-QM programs:

• Customize Documentation: Bank statements, asset statements, DSCR analysis, 1099s.
• Include Flexible Features: Interest-only periods, balloon payments, and amortization up to 40 years.
• Price for Risk: Rates typically 0.75%–1.5% above conforming, with fee structures adapted to borrower complexity.

The goal: match underwriting rigor with borrower reality to approve loans responsibly and efficiently.

2.2 Key Documentation Types 

1. Bank Statement Loans

• Who it suits: Sole proprietors, freelancers, consultants, digital entrepreneurs whose reported income on tax returns is suppressed by legitimate business expenses.
• Documentation: 12 or 24 months of personal or business checking/savings statements.
• Income calculation: Lenders sum all deposits, subtract a conservative “expense factor” (typically 25–35%), then divide by the number of months
  
  • Example: Total deposits over 12 months = $360,000. Expense factor 30% → $360,000 × 0.70 = $252,000 annual qualifying income → $21,000 monthly income.
• Loan parameters: LTV up to 80% (purchase) or 75% (refinance); FICO minimum 620; loan amounts $150K–$3M.

2. Asset-Based Loans

• Who it suits: Retirees, high-net-worth clients, and those with substantial brokerage, CD, and cash reserves who wish to preserve liquidity.
• Documentation: Statements for liquid assets (stocks, bonds, CDs).
• Income imputation: Lender selects an imputation period (84–120 months); asset balance ÷ months = monthly qualifying income.
  
  • Example: $840,000 in liquid assets ÷ 84 months = $10,000 imputed monthly income.
• Loan parameters: LTV up to 80%; FICO minimum 700; available for purchase, rate/term, or cash-out.

3. DSCR (Debt Service Coverage Ratio) Loans

• Who it suits: Real-estate investors acquiring rental properties, BRRRR strategy practitioners, and portfolio landlords.
• Documentation: Lease agreements, rent rolls, operating expense statements, P&Ls.
• DSCR calculation: Net Operating Income (NOI) ÷ Annual Debt Service
  
  • Example: Rent $3,000/month × 12 = $36,000; Expenses $12,000/year → NOI $24,000. Annual debt service $32,000 → DSCR = $24,000 / $32,000 = 0.75.
• Loan parameters: Minimum DSCR typically 0.75; LTV up to 85% (purchase) / 75% (refinance); interest-only options; amortization up to 30 years.

4. 1099 & Gig-Economy Loans

• Who it suits: Contractors, consultants, realtors, and platform-based workers.
• Documentation: Last two years of 1099 forms; supplemental pay-stubs or platform statements (Uber, Lyft, Upwork).
• Income calculation: 90–100% of gross 1099 income averaged over two years.
  
  • Example: 2023: $120,000; 2024: $100,000 → average $110,000 qualifying income.
• Loan parameters: LTV up to 80%; FICO minimum 640; purchase/refinance of primary and second homes.

2.3 Underwriting Mechanics 

Underwriting a Non-QM loan involves rigorous financial modeling to ensure borrowers can sustain payments over the long term:

1. Cash Flow Stress Testing
   
   
   • Lenders apply a rate-shock scenario (typically +2%), increasing the note rate to test repayment capacity.

1. • DTI (if used) recalculated under stress conditions to verify it remains within program limits.

1. Expense-Adjusted Income
   
   
   • For bank statements, an expense factor (25–35%) accounts for business or personal spending variability protecting against over-optimistic income figures.

1. Asset Imputation & Preservation
   
   
   • Lenders choose an imputation period balancing asset longevity and income needs.

1. • Borrowers often maintain reserve requirements (e.g., 6–12 months of payments) in liquid accounts.
     
     
2. DSCR Calibration
   
   • Property cash flow validated via lease agreements and third-party management statements.

1. • Minimum DSCR threshold (0.75–1.15) ensures property performance can weather vacancies and expense fluctuations.

1. Credit & Reserve Requirements
   
   
   • FICO score minimums vary by program (580–700).

1. • Reserve requirements typically range from 3–12 months of combined mortgage payments.

1. Automated Analytics
   
   • TFG employs proprietary underwriting algorithms to standardize stress tests, flag anomalies, and expedite decision-making targeting conditional approvals in 5 business days or less.

By meticulously calibrating these underwriting steps, Non-QM lenders like TFG maintain responsible lending practices, protect against borrower overextension, and deliver sustainable homeownership and investment outcomes.

3. Non-QM vs. Qualified Mortgage (QM)

When evaluating mortgage options, understanding the distinctions between Non-Qualified Mortgages (Non-QM) and Qualified Mortgages (QM) is critical. Both adhere to the CFPB’s Ability-to-Repay (ATR) mandate, but diverge sharply when it comes to eligibility criteria, feature flexibility, and risk allocation. Below is a side-by-side comparison, followed by an in-depth discussion of each key difference.

3.1 Income Documentation

• QM: Requires precise, verifiable income via W-2s or two years of personal/business tax returns. Standard deduction allowances apply, which can suppress qualifying income for self-employed borrowers.
• Non-QM: Embraces alternative sources:
  
  • Bank statements (12–24 months) to demonstrate cash flow.

• • Imputed asset income by dividing liquid assets over an agreed timeline.

• • DSCR analysis for rental properties, qualifying on property income alone.

• • 1099 and gig platform statements capturing contractor revenue.

Why it matters: A graphic designer deducting software subscriptions and home office expenses may report “net” income too low for QM approval, yet bank-statement loans reveal actual deposit patterns that support higher borrowing capacity.

3.2 Debt-to-Income Ratio (DTI)

• QM: Enforces a hard 43% DTI cap (total monthly debt payments ÷ gross monthly income).
• Non-QM: Uses program-specific DTI limits often stress-tested by simulating rate increases or expense spikes. Some DSCR programs bypass personal DTI entirely, focusing solely on property cash flow.

Why it matters: An entrepreneur with variable quarterly income can be unfairly penalized by QM’s static DTI threshold. Non-QM’s dynamic stress testing offers a realistic affordability assessment.

3.3 Loan Terms & Risk Features

• QM: Mortgage must fully amortize over a maximum of 30 years. Interest-only periods, balloon payments, and negative amortization are prohibited.
• Non-QM: Terms extend to 40 years, with optional interest-only or balloon periods. These features lower initial payments or provide cash-flow flexibility during property rehab or seasonal income fluctuations.

Why it matters: A fix-and-flip investor might need low initial payments during a six-month renovation; an interest-only Non-QM allows them to preserve capital until lease-up is complete.

3.4 Pricing & Fees

• QM: Generally offers the lowest conforming and government-guaranteed rates, with points and fees capped at 3% of the loan amount for loans above $100,000.
• Non-QM: Pricing reflects incremental risk typically a 0.75%–1.5% rate premium plus origination fees commensurate with documentation complexity.

Why it matters: Although slightly more expensive than conforming rates, Non-QM loans still undercut hard-money lenders (often charging 10%+), making them a cost-effective choice for non-traditional borrowers.

3.5 Safe Harbor & Liability

• QM: Lenders enjoy a “safe harbor” from ATR litigation when loans meet all QM criteria, reducing lender liability.
• Non-QM: No safe harbor; lenders bear full responsibility for proving ATR compliance. This elevates the importance of transparent disclosures, thorough underwriting, and working with reputable lenders like TFG.

Why it matters: Borrowers benefit from rigorous internal controls and clear communication. TFG’s commitment to compliance and borrower education ensures confidence throughout the process.

3.6 Consumer Protections

Both QM and Non-QM borrowers receive Truth-in-Lending disclosures (TILA), anti-predatory lending safeguards, and access to escrow accounts for taxes and insurance. However, only QM loans carry the specific CFPB safe-harbor designation. Non-QM’s lack of safe harbor doesn’t remove these standard consumer rights; it simply means lenders must diligently document ATR.

Summary:
While QM loans provide simplicity and legal protections for conventional borrowers, Non-QM mortgages accommodate today’s diverse income landscapes: expanding eligibility, offering flexible features, and maintaining long-term amortization. By understanding these differences, borrowers can select the product that aligns with their income profile, financial goals, and risk tolerance.

4. TFG’s Flagship Non-QM Programs

Truss Financial Group (TFG) offers three cornerstone Non-QM solutions designed to address the most common non-traditional borrower profiles. Each program balances underwriting rigor with documentation flexibility, ensuring responsible lending and streamlined closings.

4.1 DSCR Loans (Debt Service Coverage Ratio)

Overview

A DSCR loan underwrites based entirely on the property’s ability to generate cash flow, rather than the borrower’s personal income. This makes it ideal for real-estate investors, BRRRR (Buy-Rehab-Rent-Refinance-Repeat) strategists, and landlords who want to scale portfolios quickly without the constraints of W-2s or tax returns.

Key Features

• Qualification Metric: Debt Service Coverage Ratio (DSCR) = Net Operating Income ÷ Annual Debt Service
  
  • Minimum DSCR thresholds typically range from 0.75 (for seasoned investors) to 1.15 (for more conservative underwriting).
• Loan-to-Value (LTV): Up to 85% on purchases; 75% on refinances.
• Rates: Start near agency-jumbo + 1.00% (approximately 7.00%–7.25% as of mid-2025).
• Terms: 30-year amortization, with optional 10-year Interest-Only periods to maximize cash flow during lease-up or renovations.
• No Personal Income Verification: Eliminates W-2s, tax returns, and personal DTI calculations.

Underwriting Mechanics

1. Income Documentation
   
   • Lease agreements or rent rolls demonstrating current rental rates.

1. • Operating expense statements (property taxes, insurance, maintenance).

1. NOI Calculation
   
   • Gross scheduled rent minus vacancy assumptions (typically 5–10%) and operating expenses equals Net Operating Income (NOI).

1. DSCR Computation
   
   • Annualized NOI divided by annual debt service at the fully indexed rate must meet or exceed the program’s minimum DSCR.

1. Stress Testing
   
   • Underwriters often apply a 2% rate “shock” to ensure viability if rates rise.

Ideal Borrower Profile

• Seasoned Investors expanding multi-property portfolios.
• Fix-and-Flip Operators converting short-term projects into long-term rentals.
• Portfolio Landlords seeking acquisition or refinance liquidity without disrupting personal finances

Case Study Snapshot

Investor: Sarah, a BRRRR specialist with 6 single-family rentals.
Loan Need: $1.2M purchase of a four-plex generating $8,500/month gross rent.

Underwriting:

• Vacancy allowance 8% → Effective gross income $93,840.
• Expenses $25,000 → NOI $68,840.
• Annual debt service at 7.25% on $1.2M = $98,100 → DSCR = 0.70 (approved with a 0.75 program through conservative expense adjustment).
  Outcome: Closed in 18 business days, Interest-Only option to maximize early cash flow.

4.2 Bank Statement Loans

Overview

Bank Statement Loans enable self-employed professionals, freelancers, and gig-economy workers to qualify based on actual deposit activity rather than tax-return net income. By reviewing 12 or 24 months of bank statements, underwriters derive a reliable picture of cash flow recognizing that business expenses shouldn’t penalize borrowers.

Key Features

• Documentation: 12 or 24 months of personal or business checking account statements.
• Expense Factor: Underwriters apply a standard “expense ratio” (25%–35%) to gross deposits to account for legitimate spending.
• Loan Amounts: $150K–$3M, with 80% LTV for purchases and 75% LTV for refinances.
• Minimum FICO: 620.
• Term Options: Up to 30 years fully amortized; interest-only available on select cases.
  
  

Underwriting Mechanics

1. Deposit Analysis
   
   • All credits to the account(s) are summed over the chosen period.

1. • Transfers between accounts, loan proceeds, and non-recurring large deposits may be excluded or adjusted.
     
     
2. Expense Adjustment
   
   • Total deposits × (1 – expense factor) = annual qualifying income.

1. • Divide by 12 or 24 to determine monthly qualifying income.
     
     
2. Backup Documentation
   
   • Profit and Loss (P&L) statements or business license may be requested to corroborate the nature of deposits.
     
     
3. Stress Testing & DTI
   
   • Qualifying income is tested against monthly obligations at the note rate + 2% (if DTI applies).
     
     

Ideal Borrower Profile

• Consultants & Agencies whose published net income is suppressed by operating costs.
• Real-World Entrepreneurs with seasonal or project-based cash flow.
• Trailblazers & Creatives earning via platforms like Etsy, Amazon FBA, or YouTube.
  
  

Case Study Snapshot

Borrower: Raj, a freelance UX designer.
Documentation: 24 months of business account statements showing average monthly credits of $25,000.
Calculation: $25,000 × 75% = $18,750 monthly qualifying income.
Outcome: $800K purchase, 30-year fixed at 7.1%, closed in 20 days no tax returns required.

4.3 Asset-Based Loans

Overview

Asset-Based Loans allow individuals with significant investment portfolios stocks, bonds, mutual funds, CDs, and cash reserves to convert these holdings into qualifying income. Rather than liquidating or using margin, borrowers simply divide their asset balances over an imputation period to demonstrate sustainable cash flow.

Key Features

• Eligible Assets: Stocks, bonds, CDs, mutual funds, money market accounts.
• Imputation Period: Typically 84–120 months, chosen based on asset type and borrower goals.
• Loan-to-Value: Up to 80% for purchase or refinance; cash-out options available.
• Minimum FICO: 700.
• Term Options: 30-year fixed; interest-only available for experienced borrowers.
  
  

Underwriting Mechanics

1. Asset Verification
   
   • Confirm holdings via brokerage statements and account confirmation forms.

1. Imputed Income Calculation
   
   • Asset balance ÷ imputation months = monthly qualifying income.

1. • Example: $840,000 ÷ 84 months = $10,000/month.
     
     
2. Reserve Requirements
   
   • Borrowers generally maintain 6–12 months of mortgage payments in reserve accounts.

1. Tax Considerations
   
   • Portfolio performance and tax-liability analysis may influence imputation rates.

Ideal Borrower Profile

• Retirees & Pre-Retirees drawing from investment accounts but preferring to avoid asset liquidation.
• High-Net-Worth Professionals seeking new primary residences or second homes without triggering taxable events.
• Executives relocating globally, leveraging stock compensation to qualify.

Case Study Snapshot

Client: Elena, recently retired, with $1.2M in liquid assets.
Imputation: 84-month period → $14,285 monthly qualifying income.
Loan: $900K vacation home, 30-year fixed at 6.9%, closed in 17 days, no need to liquidate stock positions.

 

5. Complete Non-QM Loan Menu

Below are eight additional Non-QM programs from TFG’s suite. Each is described in detail eligibility, documentation, terms, and ideal borrower profiles to help you select the right fit.

5.1 Bank Statement Home Equity Loans 

Overview
Tap into your home equity with a second lien without disturbing your first mortgage’s low rate. Bank Statement Home Equity Loans use the same documentation standards as primary Bank Statement Programs but allow cash-out for renovations, investments, debt consolidation, or large purchases.

Eligibility & Documentation

• Loan-to-Value (CLTV): Up to 80% combined (first + second).
• Statements: 12–24 months of personal or business checking/savings statements.
• FICO Minimum: 620.
• Income Calculation: Total deposits minus a 25–35% expense factor, averaged monthly.
  
  

Terms & Pricing

• Loan Amounts: $50K–$1.5M.
• Rates: Approximately conforming +1.00%–1.50%.
• Amortization: Up to 30 years; interest-only on select deals.
• Fees: Standard origination; no prepayment penalties.

Ideal Borrowers

• Homeowners with strong equity needing liquidity.
• Self-employed families funding education or medical expenses.
• Investors consolidating high-interest debt.
  
  

5.2 1099 Income Loans

Overview
Designed for contractors and 1099-based professionals (realtors, physicians, IT consultants), these loans treat 90–100% of gross 1099 income as qualifying, bypassing W-2 requirements.

Eligibility & Documentation

• Forms: Last two years of 1099-MISC or 1099-NEC forms.
• Supplemental Proof: Bank statements or platform reports (if needed).
• FICO Minimum: 640.
• DTI: Program-specific; stress-tested with a +2% rate buffer.

Terms & Pricing

• LTV: Up to 80% purchase/refinance.
• Loan Amount: $150K–$2M.
• Rates: Conforming +0.75%–1.25%.
• Amortization: 30-year fixed; IO available.

Ideal Borrowers

• Independent professionals with substantial 1099 earnings.
• Entrepreneurs whose net income is reduced by business write-offs.
• Temporary contract workers establishing residency via home purchase.

5.3 Jumbo Loans with 10% Down 

Overview
High-earning buyers can access up to $3M in financing with just 10% down. Ideal for priced-out markets where conforming limits (e.g., $726,200 in most areas) aren’t enough.

Eligibility & Documentation

• Down Payment: Minimum 10%.
• FICO Minimum: 680.
• Income Docs: W-2s, tax returns, bank statements, or asset imputation.
• Reserves: 6–12 months of mortgage payments.

Terms & Pricing

• LTV: 90% (purchase); 80% (refinance).
• Rates: Jumbo +0.50%–1.00%.
• Loan Sizes: $726,201–$3M.
• Amortization: 30 years; IO options.

Ideal Borrowers

• High-income professionals priced out of conforming limits.
• Buyers in coastal or urban markets with high home values.
• Those carrying student debt whose DTI needs flexibility.

5.4 Foreign National Loans (ITIN) 

Overview
Open U.S. doors for international buyers without Social Security Numbers, using ITIN/no-SSN programs that rely on foreign credit or substantial assets.

Eligibility & Documentation

• Identification: ITIN and valid visa or I-94.
• Credit: Three foreign trade lines or a written credit reference letter.
• Alternative Income: Bank statements, asset imputation, rental DSCR.
• FICO: No U.S. FICO required.

Terms & Pricing

• LTV: Up to 75% (purchase).
• Loan Amounts: $200K–$5M.
• Rates: +1.00%–1.50% above comparable non-foreign QM.
• Amortization: 30 years; IO case-by-case.

Ideal Borrowers

• International executives relocating to the U.S.
• Global investors seeking rental property cash flow.
• Students or families purchasing while awaiting permanent status.

5.5 Interest-Only Home Loans

Overview
Interest-Only (IO) Home Loans lower initial payments by deferring principal ideal for fix-and-flippers, new-build inventory, or investors managing cash-flow seasonal spikes.

Eligibility & Documentation

• Income Proof: Bank statements, assets, DSCR, or 1099s.
• Reserves: 6–12 months of full payments (IO + eventual amortization).
• Credit: Minimum FICO 640.

Terms & Pricing

• IO Period: 5–10 years.
• Amortization: 30-year (10-year IO + 20-year amortization) or 40-year (10-year IO + 30-year amortization).
• Rates: +0.25%–0.75% above comparable fully amortized terms.
  
  

Ideal Borrowers

• Rehab investors awaiting lease-up.
• Buyers expecting significant income growth.
• Borrowers with seasonal revenue (e.g., tourism properties).

5.6 Recent Credit Event Loans 

Overview
Borrowers fresh out of bankruptcy, foreclosure, or short sale can qualify as early as 1 day post-event no lengthy seasoning periods.

Eligibility & Documentation

• Credit Event: Chapter 7 discharge, Chapter 13 dismissal, foreclosure, or short sale
• FICO: Minimum 620 (post-seasoning programs may require 640+).
• Income: Bank statements, assets, DSCR, 1099s.
• Reserves: 6–12 months.

Terms & Pricing

• LTV: Up to 75% at day-one; improves to 80%–85% after 24 months.
• Rates: +1.25%–1.75% above conforming.
• Amortization: 30 years; IO possible.

Ideal Borrowers

• Individuals rebuilding credit and homeownership goals.
• Those seeking to refinance into better terms post-seasoning.
• Strategic buyers capitalizing on credit event recovery.

5.7 Commercial Small-Balance Multifamily Loans 

Overview
Acquire or refinance 5–10 unit properties ($500K–$5M) with terms tailored for small-scale landlords and emerging syndicators.

Eligibility & Documentation

• Property: 5–10 residential units under one legal entity.
• DSCR: Minimum 1.15; non-recourse available above $1M upon request.
• Borrower: Single-entity LLC or individual, with proof of management experience.
• Reserves: 6–9 months of debt service.

Terms & Pricing

• LTV: Up to 80%.
• Rates: +0.75%–1.25% above multifamily conforming benchmarks.
• Amortization: 25–30 years; IO optional.
• Fees: Standard origination; appraisal fee based on property size.

Ideal Borrowers

• Small syndicators testing multi-family market.
• Portfolio landlords expanding beyond single-family.
• Emerging developers converting properties into rentals.

5.8 Temporary Buy-Down Mortgages 

Overview
Temporary rate buy-downs (2-1 or 3-2-1) reduce the mortgage rate by 2–3% in year one, tapering up annually until the note rate is reached seller-funded or builder-funded for new construction.

Eligibility & Documentation

• Participants: Purchase transactions; seller or builder funds buydown escrow.
• Documentation: Standard Non-QM income verification (bank statements, assets, DSCR, 1099s).
• Reserves: 6 months of full payments at note rate.

Terms & Pricing

• Buydown Structure: Year 1: note – 2%; Year 2: note – 1%; Year 3: note.
• LTV: Up to 80%–85%.
• Rates: Comparable fully indexed note rate + buydown offset.

Ideal Borrowers

• First-time buyers seeking temporary affordability.
• Builders and sellers enhancing marketability.
• Buyers in lock-tight markets needing initial payment relief.
  
  

Applying for a Non-QM Mortgage

Securing a Non-QM loan with Truss Financial Group is designed to be as seamless as possible combining digital convenience with personalized guidance. Below, we outline each step in detail, including timelines, required documents, and best-practice tips to ensure a swift approval and closing, often in as few as 21 business days.

6.1 Discovery Call & Pre-Qualification 

1. Initial Consultation
   
   • What Happens: You speak with a Senior Loan Officer who maps your financial profile income sources, assets, credit history, and goals.

1. • Outcome: Identification of the optimal Non-QM program (e.g., DSCR, Bank Statement, Asset-Based).
     
     
2. Soft Credit Pull
   
   • Purpose: Estimate rates, fees, and eligibility without affecting your credit score.

1. • Timeline: Instantaneous results available during the call.
     
     
2. Pre-Qualification Letter
   
   • Utility: A non-binding letter indicating conditional approval and estimated terms, useful when shopping properties or negotiating with sellers.

Best Practice: Have 3–6 months of recent bank statements and a current credit report on hand to speed up this stage.

6.2 Digital Application & Disclosures 

1. Online Application
   
   • Format: A secure, mobile-friendly 10–15 minute form collecting personal, property, and program information.

1. • Fields: Basic borrower details, property address, loan program selection, and disclosure authorizations.

1. Automated Disclosures
   
   • What You’ll Receive: Electronic Truth-in-Lending (TILA) and Good Faith Estimate (GFE) disclosures via e-mail.

1. • Action Required: E-sign within 24 hours to lock the rate and proceed to underwriting.
     
     
2. Document Checklist
   
   • System-Generated: A personalized list of required documentation appears immediately after application submission bank statements, asset statements, leases, 1099s, IDs, etc.
     
     

6.3 Underwriting & Appraisal 

1. Underwriting Review
   
   
   • Timeline: 3–5 business days for a conditional approval.

1. • Process: Underwriters verify documentation, run stress tests, and calibrate program-specific criteria (DSCR calculations, expense factors, asset imputation).

1. • Conditional Approval: You receive a “Clear to Appraise” once underwriting confirms your file is in shape.
     
     
2. Appraisal Ordering
   
   • Auto-Triggered: Upon conditional approval, the appraisal is ordered through a third-party services.

1. • Field Work: A certified appraiser inspects the property, typically within 7–10 days of referral.
     
     
2. Appraisal Review
   
   • Timeline: 2–3 days to integrate the appraisal into your file, determine final LTV, and confirm loan-to-value compliance.

1. • Possible Outcomes:
     
     • Accept: Appraisal supports the contract price move to clear-to-close.

1. • • Reconsider or Re-Negotiate: If the appraised value is lower, you may adjust loan amount, increase down payment, or request a second review.

Best Practice: Provide comparables or recent renovation documentation up front if you believe the contract price exceeds the neighborhood norm.

6.4 Clear-to-Close & Final Documentation 

1. Clear-to-Close Issued
   
   • What It Means: All underwriting conditions are satisfied; the file is ready for final preparation.

1. • Timeline: Usually within 1 business day of appraisal review.
     
     
2. Final Closing Disclosure (CD)
   
   • Delivery: You’ll receive the CD at least 3 business days before scheduled closing detailing rates, fees, and cash-to-close.

1. • Review Period: Federal law mandates a 3-day waiting period after you receive the CD before you can sign.
     
     
2. Closing Logistics
   
   • Mobile Notary: We send a notary to your home or office at your convenience.

1. • Wire Instructions: Final wiring documents and homeowner’s insurance declarations are coordinated electronically.
     
     

6.5 Funding & Post-Closing 

1. Wire Transfer
   
   • Timing: Funds are wired to the escrow or title company on the scheduled funding date often 21 business days from application.

1. • Confirmation: You receive a funding confirmation once the wire clears.
     
     
2. Recordation
   
   • County Office: The deed and mortgage are recorded, typically within 1–2 business days post-funding.
     
     
3. Ongoing Support
   
   • Account Access: Our portal gives you 24/7 access to your loan’s status and payment schedule.

1. • Customer Service: Your Senior Loan Officer remains available for questions on payment, escrow, or future refinancing.
     
     

Total Timeline Estimate:

• Discovery to Pre-Qual: Same day (1 business day)
• Application to Conditional Approval: ~5 business days
• Appraisal & Review: ~8–12 business days
• Clear-to-Close to Funding: 3–4 business days
• Overall: As few as 21 business days
  
  

8. Advanced Strategies for Investors & High-Net-Worth Clients

For experienced investors and high-net-worth (HNW) borrowers, Non-QM lending offers sophisticated tools to optimize leverage, preserve liquidity, and structure portfolios. Below are three advanced strategies that demonstrate how TFG’s Non-QM programs can be combined and tailored to complex financial goals.

8.1 Portfolio Diversification via DSCR Lending 

Concept
Rather than funding all properties with 20% down conforming loans, savvy investors use DSCR loans to acquire multiple cash-flowing assets with minimal personal documentation or equity outlay. By qualifying each property on its own merits, an investor can:

• Conserve Personal Capital for renovations, acquisitions, or contingencies.
• Leverage Multiple Cash Flows across disconnected properties, spreading risk geographically and by property type.
• Scale Rapidly without personal income verification delays.
  
  

Implementation

1. Select Properties with Strong NOI: Focus on markets with stable rents and low vacancy rates.
2. Run DSCR Stress Tests: Ensure each property’s NOI covers 75–100% of its debt service, even under a 2% rate “shock.”
3. Layer Financing: Combine DSCR for stabilized assets and Bank Statement or Asset-Based programs for new acquisitions or portfolio refinances.
4. Monitor Combined DSCR: While each loan stands alone, reviewing aggregate cash flows ensures overall portfolio viability and helps anticipate reserve needs.
   
   

Example
An investor acquires three single-family rentals using DSCR loans:

Property C’s DSCR is below 0.75, so the investor uses a 10% Interest-Only option to lower the initial debt service, raising effective DSCR to 0.80.

By diversifying across states and property types, and tactically using IO periods this borrower builds a portfolio that outpaces what a single conforming loan could achieve.

8.2 Blending Asset & Income Programs 

Concept
High-net-worth clients often juggle multiple income sources: portfolio distributions, consulting side gigs, rental cash flows, and W-2 employment. Blending programs allows them to maximize borrowing capacity:

• Asset-Based Loans for the lion’s share of qualifying income.
• Bank Statement or 1099 Loans to supplement imputed income with active cash flow.
• DSCR Loans on investment properties to keep consumer debt separate from business holdings.

Implementation

1. Determine Asset Contribution: Calculate imputed income from liquid assets over a chosen period (84–120 months).
2. Supplement With Active Income: Use bank statements or 1099s to showcase consulting fees or gig revenue.
3. Allocate Loans by Purpose:
   
   • Primary residence: Asset-based imputation + W-2.

1. • Vacation home: Bank statements alone.

1. • Rental properties: DSCR analysis.
     
     

Example
A senior executive has $2M in investments and earns $200K/year consulting:

• Asset-Based Loan: $2M ÷ 84 mo = $23,810/mo imputed income → Qualifies for $4M primary residence.
• Bank Statement Loan: $200K × 75% expense factor = $150K annual income → Finances $800K vacation home.
• DSCR Loan: Rental generates $50K NOI → Secures $600K four-plex.

This blended approach leverages every dollar of qualifying ability without overstating any single income stream.

8.3 Trust & Tax Structure Optimization 

Concept
HNW clients often hold real estate or cash in trusts or corporate entities for liability protection and estate planning. TFG’s Non-QM programs accommodate these structures, enabling clients to:

• Maintain Legal Separations between personal and business assets.
• Optimize Tax Outcomes by aligning financing within trust or corporate vehicles.
• Simplify Succession Planning by keeping property ownership within family or grantor trusts.

Implementation

1. Entity Verification: Provide trust documents (e.g., Certificate of Trust) or corporate formation papers.
2. Signatory Approval: Trustees or authorized officers must sign loan documents.
3. Documentation:
   
   • Trust: Beneficiary list, trustee signature pages, trust agreement excerpts.

1. • Corporation/LLC: Articles of Incorporation, Operating Agreement, EIN verification.
     
     
2. Underwriting Adjustments:
   
   • Reserve Buffers: Slightly higher cash reserves (e.g., 9–12 months) due to multi-entity complexity.

1. • Rate Considerations: Minor rate premium (0.125%–0.25%) for non-individual entities.
     
     

Example
A family office holds multi-state rentals in an LLC and a grantor trust:

• LLC DSCR Loan: 0.85 DSCR on 10-unit portfolio → $2.5M financing.
• Trust Asset-Based: $1.5M portfolio assets → $1M financing for a primary residence held in trust.

By aligning property with entity structure, the client preserves asset protection and streamlines estate planning while benefiting from Non-QM’s flexible underwriting.

Summary of Section 8

Advanced Non-QM strategies empower investors and HNW clients to:

• Rapidly scale rental portfolios with DSCR loans.
• Leverage multiple income sources by blending asset, bank statement, and DSCR programs.
• Maintain sophisticated ownership structures (trusts, LLCs) without forfeiting financing flexibility.

 

9. Expanded Frequently Asked Questions

Below are 20 nuanced FAQs covering edge cases, complex scenarios, and detailed program mechanics to help you make informed Non-QM decisions.

1. What documentation is accepted for Non-QM loans?
   Non-QM programs accept a variety of documents beyond W-2s and tax returns, including
   
   • Bank statements (12–24 months of personal/business checking or savings accounts).

1. • Asset statements (brokerage, CD, money market accounts).

1. • Lease agreements and rent rolls for DSCR loans.

1. • 1099-MISC/NEC forms and gig-platform reports (Uber, Upwork).

1. • Trust or corporate formation documents when financing held in entities.

1. • Foreign credit reference letters for ITIN/non-resident borrowers.
     
     
2. Are Non-QM mortgages more expensive than conforming loans?
   Yes, typically pricing includes a 0.75%–1.5% rate premium over conforming rates to account for alternative documentation risk. However, even at these levels (6.25%–8.17% as of mid-2025), Non-QM remains far cheaper than hard-money (10%+) or private money lenders.
   
   
3. How are Non-QM mortgage payments calculated?
   
   • Fully amortizing: Standard 30- to 40-year schedules interest and principal calculated via PMT formula at your note rate.

1. • Interest-only (IO): You pay only interest during the IO period (5–10 years), then either refinance or begin amortizing principal over the remaining term.
     
     
2. Is PMI required for Non-QM loans?
   Private Mortgage Insurance is rare. Many Non-QM products bake risk into the rate and require higher reserves instead. Some 90% LTV programs offer lender-paid mortgage insurance as an alternative to borrower-paid PMI.
   
   
3. What property types qualify?
   
   • Single-family homes (detached or attached).

1. • Condominiums (including non-warrantable).

1. • 2–4 unit properties under one roof.

1. • Small multifamily up to 10 units (under Commercial Small-Balance programs).

1. • Planned unit developments, townhomes, and PUDs.
     
     
2. Is a Non-QM loan the same as a hard-money loan?
   No. Hard-money loans are short-term, asset-only, high-rate/fee products typically from private lenders. Non-QM mortgages are fully underwritten, amortized over 30–40 years, report to credit bureaus, and adhere to ATR standards.
   
   
3. What credit score do I need?
   
   • Bank Statement Loans: Minimum FICO 620.

1. • DSCR Loans: 640–700 depending on LTV and term.

1. • Asset-Based Loans: Minimum FICO 700.

1. • Recent Credit Event: FICO 620 post-BK; improves with seasoning.
     
     
2. How do I qualify after bankruptcy or foreclosure?
   Certain Non-QM programs allow day-one eligibility post-bankruptcy discharge, short sale, or foreclosure with up to 75% LTV. Rates improve and LTV increases (to 80–85%) after 24 months of seasoning.
   
   
3. Can I use a Non-QM loan on a second home or investment property?
   Yes. Many programs support primary, second-home, and investment loans. DSCR products specifically target investment properties, while Bank Statement and Asset-Based loans can finance second homes.
   
   
4. What reserves are required?
   Reserve requirements vary by program, typically 3–12 months of combined mortgage payments held in liquid accounts. Higher-risk scenarios (IO, trusts, low DSCR) trend toward 9–12 months.
   
   
5. How long does the Non-QM process take?
   

• Discovery to Pre-Qual: Same day.
• Application to Conditional Approval: 3–5 business days.
• Appraisal & Review: 8–12 business days.
• Clear-to-Close to Funding: 3–4 business days.
  
  
• Overall: As few as 21 business days.
  
  

1. Are rate locks available?
   

Yes. Once you e-sign disclosures and lock your rate, you typically have a 45–60 day window. Extended locks are available for an additional fee.

1. What if my appraisal comes in low?
   

 Options include:

• Increase down payment to match the lower value.
• Renegotiate purchase price with the seller.
• Request a second appraisal or appraisal review (subject to lender guidelines).
  
  

1. Can I pay off my loan early?

Most Non-QM loans permit prepayment without penalty. Always confirm in your loan documents; some jumbo or specialized products may include early-payment fees.

1. How do I handle taxes and insurance escrow?

Non-QM mortgages can include an escrow account for property taxes and homeowner’s insurance, just like QM. Escrow waivers are rare but possible for high-net-worth borrowers.

1. Is interest deductibility impacted?

Non-QM mortgages follow the same IRS rules: interest paid on mortgages up to $750,000 (for single filers) is generally tax-deductible. Consult your tax advisor for personalized guidance

1. Can I add a co-borrower or co-signer?

Yes. Co-borrowers must also meet program credit and documentation requirements. Non-occupant co-borrowers can help a primary occupant qualify by boosting income or reserves.

1. Do these loans report to credit bureaus?

All TFG Non-QM mortgages report payment history to major credit bureaus, helping borrowers build or rebuild credit.

1. What happens if I refinance in the future?

Many Non-QM borrowers refinance into lower-cost QM loans when they accumulate traditional documentation or improve credit. TFG can handle future rate/term refinances seamlessly through our digital portal.

1. How do I choose the right program?
   

Work with a Senior Loan Officer to assess:

• Primary income type (self-employed, asset-based, rental).
• Borrower goals (purchase vs. refinance, cash-out needs, investment growth).
• Risk tolerance (willingness to pay IO premium, reserve capacity).
• Timeline & holding strategy (short-term flip vs. long-term hold).

By aligning program features with your specific profile, you maximize approval odds, optimize costs, and achieve your real estate objectives.