Non-QM loans · Mortgage lender · Ladera Ranch, California
Non-QM loans for borrowers whose income doesn’t fit the tax-return box.
A Non-QM loan is a mortgage that verifies your ability to repay with bank statements, 1099s, a CPA-prepared P&L, your assets, or a rental property’s cash flow instead of tax returns and W-2s. It is built for self-employed borrowers, real estate investors and people with significant assets. We typically close Non-QM loans in about 12 days.
The short answer
What is a Non-QM loan?
A Non-QM (non-qualified mortgage) loan is any home loan that falls outside the federal “qualified mortgage” rules that Fannie Mae, Freddie Mac and FHA loans follow. The lender still has to verify that you can repay, but it can use documents other than tax returns to do it.
Most mortgages are qualified mortgages: they are underwritten to agency guidelines and sold to Fannie Mae or Freddie Mac. Those guidelines read your income off your tax returns. That works for W-2 employees and fails for many business owners, investors and retirees, whose real cash flow is much higher than their taxable income.
Non-QM lenders hold or sell these loans privately, so they can underwrite to what your finances actually look like. Non-QM is not “stated income.” The federal ability-to-repay rule still applies to owner-occupied homes, so every program documents income with third-party records: bank statements, 1099s, a preparer-signed P&L, account statements, or a lease and appraisal.
Five ways to qualify
Which Non-QM program fits you?
Bank statement loans
Self-employed
Qualify on 12 or 24 months of business or personal deposits. The lender applies an expense ratio, 50% standard and lower for lean service businesses.
Bank statement & P&L loans →P&L loans
Self-employed
Qualify on a profit and loss statement prepared by your CPA, EA or licensed tax preparer, using the expenses your business actually paid.
How P&L loans work →1099 loans
Contractors & commission earners
Qualify on your 1099s instead of your tax return. Many programs count 90% of 1099 income, with no deduction for write-offs.
1099 loans →Asset depletion loans
Retirees & high net worth
Turn liquid assets into qualifying income. Eligible balances are divided over a set number of months, commonly 60 or 84.
Asset depletion loans →DSCR loans
Rental property investors
Qualify on the property’s rent compared with its payment. No personal income, no tax returns, and LLC vesting is allowed.
DSCR loans →Fix & flip and bridge loans
Short-term investors
Finance the purchase and the renovation of an investment property, interest-only for 12 to 24 months, sized against the after-repair value.
Fix & flip loans →Side by side
Non-QM programs compared
| Program | What qualifies you | Typical down payment | Typical credit | Best for |
|---|---|---|---|---|
| Bank statement | 12–24 months of deposits, less an expense ratio | 10–20% | 620–660+ | Business owners whose revenue lands in the bank |
| P&L | CPA- or preparer-signed P&L for 12–24 months | 15–20% | 640–720+ | Owners whose real margins beat a 50% expense ratio |
| 1099 | 12–24 months of 1099s, often counted at 90% | 10–20% | 620+ | Independent contractors, agents, commission earners |
| Asset depletion | Eligible assets divided by 60–84 months | 15–30% | 620–700+ | Retirees and investors with large liquid balances |
| DSCR | Property rent divided by the full payment (PITIA) | 20–25% | 620–680+ | Long-term and short-term rental investors |
| Fix & flip | Purchase, rehab budget and after-repair value | 10–15% of purchase | 650+ | Investors renovating to sell or refinance |
Typical market ranges as of October 2026. Each program’s exact limits depend on loan size, property type, credit and occupancy.
What it costs
Are Non-QM rates higher than conventional?
Usually somewhat, but the gap has narrowed. Industry rate-lock data from August 2026 showed DSCR loans pricing about half a percentage point above conventional loans, down from roughly three-quarters to a full point a year earlier.
Non-QM loans are not backed by Fannie Mae or Freddie Mac, are underwritten by hand, and sell to private investors, so they carry a modest premium. How much depends on your credit score, down payment, documentation type and loan size. A self-employed borrower with strong credit and 20% down often pays far less of a premium than they expect.
Many borrowers use a Non-QM loan to buy now and refinance into a conventional loan later, once their tax returns show the income. Ask us to price both side by side.
How we close in about 12 days
Non-QM doesn’t have to mean a slow escrow
Our team is built around fast closings, and Non-QM is where it shows. We typically close Non-QM loans in about 12 days on a typical file. The difference is in the first 48 hours:
- Program picked before you apply. We read two months of statements, your 1099s or the rent roll first, so the file goes in under the right program the first time.
- Income calculated up front. We run the qualifying income the way the underwriter will, including the expense ratio, so there are no surprises at conditional approval.
- Appraisal ordered on day one. The appraisal is usually the longest step, so it starts as soon as you’re in contract.
- Conditions cleared in batches. One organized request for documents instead of a drip of emails. Your agent gets status updates without having to ask.
Timelines depend on the appraisal, title, insurance and how quickly documents come back, so we will tell you on day one whether your file fits a 12-day close.
Who uses Non-QM
Who Non-QM loans are built for
- Business owners who write off enough to shrink their taxable income.
- 1099 contractors and 100% commission earners, including real estate agents.
- Real estate investors who want to qualify on rent, buy in an LLC, or hold more properties than agency limits allow.
- Retirees and high-net-worth buyers with large balances but modest monthly income.
- Recently self-employed borrowers with prior experience in the same line of work.
- Buyers above conforming limits who need jumbo-sized loans with flexible documentation.
Common questions
Non-QM loan FAQ
What does Non-QM mean?
Non-QM stands for non-qualified mortgage: a home loan that does not follow the federal qualified-mortgage rules used for Fannie Mae, Freddie Mac and FHA loans. It still requires the lender to verify that you can repay, but it can use bank statements, 1099s, a P&L, assets or rental income instead of tax returns.
Is a Non-QM loan the same as a stated-income loan?
No. Stated-income loans let borrowers state income without proof. Non-QM loans document income with third-party records such as bank statements, 1099s, a preparer-signed P&L, account statements or a lease and appraisal.
How fast can a Non-QM loan close?
We typically close Non-QM loans in about 12 days on a typical file. The timeline depends mostly on the appraisal, title and how quickly documents are provided.
What credit score do I need for a Non-QM loan?
Many programs start around 620. Better pricing and higher loan-to-value limits usually start around 680 to 720. Requirements vary by program and loan size.
How much do I need to put down?
Commonly 10% to 20% for bank statement and 1099 loans on a primary home, and 20% to 25% for DSCR rental loans. Larger loans and lower credit scores require more.
Can I refinance out of a Non-QM loan later?
Yes. Many borrowers refinance into a conventional loan once their tax returns show enough income. Check whether your loan has a prepayment penalty first; most owner-occupied Non-QM loans do not, while many investor loans do.
Does Franklin Direct do Non-QM loans outside California?
Our team is based in Ladera Ranch and focuses on California. Ask us about your state; licensing and program availability vary.
Find out what you qualify for
Get your options, usually the same day
Tell Justin how you earn your income or what the property rents for, and you’ll get the programs you qualify for, the documents each one needs, and a realistic price range. No credit pull to start.
Franklin Direct is a mortgage lender in Ladera Ranch, California, powered by Franklin Loan Center. Our team specializes in Non-QM, self-employed and investor loans, and we typically close Non-QM loans in about 12 days.
Three ways to start
Apply now, or email or text Justin directly — usually answered the same day.