When you think about different types of mortgage loans you could apply for, what comes to mind? Probably conventional mortgages. Depending on your situation, maybe FHA or VA loans.
I’ve been reporting on mortgages for a decade, and I believe one type of mortgage loans doesn’t get enough attention. It’s called a non-qualifying mortgage, commonly referred to as a non-QM loan.
Thankfully, more homebuyers have seen the light over the last year or two, and non-QM loans are growing in popularity.
According to Optimal Blue Market Advantage data, non-QM loans made up about 9% of the total mortgage amount homebuyers took out in December 2025, up from roughly 6.5% a year earlier and under 4% in December 2023.
The most notable difference between non-QM loans and other mortgage types is that you don’t need to provide the traditional W-2s and work paystubs. Bank statements, 1099s, and other financial documents can serve as your proof of income.
“It’s a more strategic loan to allow you to get into a home without needing to have that conventional structure that’s been so challenging for so many people, especially that have been self-employed for so many years now,” LoanDepot Branch Manager Jessica Celia told TheStreet in an interview.
What homebuyers should know about non-QM loans
First of all … what even is a non-QM loan?
Non-qualified mortgages are ones that don’t meet the Consumer Financial Protection Bureau (CFPB) guidelines for a “qualified mortgage.” It isn’t a conventional (conforming or jumbo) loan insured by Fannie Mae or Freddie Mac, nor is it a government-backed one such as an FHA, VA, or USDA loan.
“I generally just explain it to people as a non-traditional loan,” Celia told TheStreet.
Many traditional loans go through automated underwriting, meaning a lender uses automated technology to process your mortgage application. Non-QM loans use manual underwriting, though, so real people go through your application.
Manual underwriting allows for more flexibility, and the loan officer is able to take in your full financial picture when deciding whether to approve you for a mortgage, rather than dismissing your application because you don’t meet a couple of criteria. This means various types of workers can qualify for a mortgage and buy a home.
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Real estate investors may qualify for debt service cover ratio (DSCR) loans, which are specifically for investment properties used for rental income. Applicants can use their rental income to qualify for a loan. Celia told TheStreet that the DSCR loan has become one of the most popular non-qualifying mortgages right now.
Self-employed people typically don’t have W-2s, so they can apply for bank statement loans, 1099 loans, or profit-and-loss (P&L) loans. These are all types of non-QM loans that allow you to qualify with cash flow or taxable income via your 1099 form.
High-net-worth homebuyers can qualify with their assets rather than their income with an asset-qualifier loan.
If you are a resident or non-resident of the U.S. who files taxes, you may be eligible for an ITIN loan. These mortgages allow you to apply with your Individual Tax Identification Number if you don’t have a Social Security number.
This is not an exhaustive list of non-QM loan types, but it should give you an idea of how many people can benefit from these mortgage loans.
Why are non-QM loans becoming more popular?
According to the United States Census Bureau, there were roughly 33 million business owners and self-employed people in the U.S. in late 2025. That’s a lot of people who could benefit from non-qualified mortgages, such as bank statement or 1099 loans.
In 2025, the data-driven technology company Cotality reported that investors bought almost one-third of single-family homes. As of April 2020, they only accounted for 14.5% of home purchases. The rise in real estate investors has made DSCR loans more popular.
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California lender State Financial reported that in 2024, the international market for asset-based mortgages was $785 billion. Experts predicted that this number would grow 10% by 2029.
“The rise of self-employment, the accumulation of wealth in investment portfolios, and stricter bank lending regulations are accelerating this trend,” read the State Financial article. “For many borrowers, asset-based mortgages represent the only viable way to leverage wealth without liquidating investments.”
Overall, non-QM loans just provide more flexibility for mortgage borrowers who don’t fit into a certain box.
“In my opinion, it allows for a lot more commonsense underwriting,” Celia told TheStreet. She said underwriters can see an applicant has great credit, a strong financial history, and has enough assets or income from their business to get a mortgage. So, even if you don’t meet the guidelines for a conforming or FHA loan, you can still buy a home.
When my husband and I bought our first home, we both had traditional jobs and W-2 incomes. Now, I’m self-employed, and I would definitely consider a non-QM loan if we decided to move.
Dangerous misconceptions about non-QM loans
Common misconceptions about non-qualifying mortgages can actually be hurtful if they keep people from applying for non-QM loans.
“I think the common misconception is that… non-QM loans are meant for people that cannot afford homes,” Celia told TheStreet. “That couldn’t be further from the truth.”
“The average non-QM loan that I think I’ve done this year is at least $750,000,” she continued, “with the top being a $3 million property for a developer who is in the process of developing multiple multi-million-dollar condo complexes, and we used a profit-and-loss loan.”
Sometimes people apply for a non-QM loan because it’s the easiest option for their situation, not because they don’t qualify for a traditional mortgage.
Another misconception is that non-QM interest rates are significantly higher than what you’ll pay on a regular mortgage. Depending on which type of non-QM loan you get and your personal financial profile, mortgage rates may be a little higher, but probably not as drastically as people say.
“We generally don’t see rates that are much higher. We’re not seeing [rates in the] 9%, 10%, 12% range,” Celia said. She said most companies that charge high mortgage rates on non-QM loans are hard-money lenders, which typically provide mortgages to buyers in tough financial situations.
The truth is that a non-QM loan might just make the most sense for you. And it’s worth asking two or three mortgage lenders if this is the case as you shop during homebuying season.
Related: Mortgage rate gridlock sparks housing market shift
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