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Non-QM Mortgage

Traditional Mortgage

Definition

Non-Qualified Mortgages don’t meet strict federal guidelines (e.g., QM rules under Dodd-Frank), allowing alternative income verification and higher debt ratios.

Qualified Mortgages follow rigid federal standards, requiring W-2s, tax returns, and strict debt-to-income (DTI) ratios (typically under 43%).

Eligibility

Ideal for self-employed, freelancers, investors, or those with non-traditional income. Uses bank statements, 1099s, profit & loss statements, or assets to qualify.

Suited for W-2 employees with stable, documented income and strong credit. Requires full tax returns and pay stubs.

Documentation

Simplified income docs (e.g., 12-24 months bank statements, 1099s, or P&L). No tax returns often needed.

Extensive paperwork, including 2 years of tax returns, W-2s, pay stubs, and strict income verification.

Debt-to-Income (DTI)

Flexible or no DTI requirements (e.g., DSCR loans focus on property cash flow, not personal income).

Strict DTI caps (often 36-43%), limiting borrowing power for high earners with debt.

Speed

Faster closings due to streamlined docs and less red tape—often weeks, not months.

Slower due to rigorous underwriting and documentation—can take 30-60 days.

Loan Types

Diverse options like bank statement loans, 1099-only, asset utilization, DSCR for investors, and no prepayment penalty loans.

Standard fixed or adjustable-rate mortgages, FHA, VA, or USDA loans with rigid criteria.