Non-QM Bank Statement Loans are a type of mortgage that doesn’t follow the traditional Qualified Mortgage (QM) guidelines set by the Consumer Financial Protection Bureau (CFPB). They are designed for borrowers who may not meet the strict income documentation requirements for conventional loans, such as W-2 forms or pay stubs.

Here’s a breakdown of the key features:

Income Verification: Instead of traditional income documents like tax returns, non-QM bank statement loans use the borrower’s bank statements to verify income. Lenders typically request 12 to 24 months of personal or business bank statements to assess cash flow and determine the borrower’s ability to repay.

Self-Employed Borrowers: These loans are especially popular among self-employed individuals, business owners, or freelancers who might have irregular income or deductions that would otherwise prevent them from qualifying for a traditional mortgage.

Flexible Guidelines: Non-QM loans offer more flexible qualification criteria, allowing for higher debt-to-income (DTI) ratios or more lenient credit score requirements.

Down Payments: These loans may require a larger down payment, often around 20% or more, but the terms vary depending on the lender and the borrower’s financial situation.

Interest Rates: The interest rates on non-QM loans can be higher than those of conventional loans due to the higher risk the lender is taking on by relaxing traditional qualification requirements.

No Prepayment Penalties: Some non-QM loans may offer no prepayment penalties, giving borrowers the flexibility to pay off the loan early without facing extra charges.

Loan Terms: These loans come in various terms, like fixed or adjustable rates, with the loan duration often being 30 years, though shorter terms might also be available.

They’re a great option for borrowers who can demonstrate their ability to repay through bank statements but may struggle with traditional documentation methods. However, because they are non-QM, the risk is higher for both the borrower and the lender, so it’s important to carefully evaluate the terms and ensure they fit your financial situation.