How to Qualify for a Mortgage With Private / Non-QM Loans

For many hopeful homebuyers, qualifying for a traditional mortgage can feel impossible. Maybe your income doesn’t fit neatly into a W-2. Maybe you’re self-employed and write off expenses. Maybe you experienced a credit event in the past, or you simply earn money in ways a traditional lender doesn’t fully understand. You might find yourseld wonderinf how to qualify for a mortgage?

If this sounds familiar, you’re far from alone, and you do have options.

Private and Non-QM (Non-Qualified Mortgage) loans exist specifically for borrowers who fall outside standard guidelines. These loans open the door to homeownership for thousands of people each year who otherwise wouldn’t fit inside the conventional mortgage box.

Below, we break down what Non-QM loans are, how they work, who they’re for, and most importantly: what you need to qualify.

What Are Non-QM Loans?

Non-QM mortgages are home loans that do not meet the strict federal rules that define “Qualified Mortgages.” This doesn’t mean they’re risky or unregulated, it simply means they allow flexible income verification, unique financial situations, and alternative documentation.

These loans are often backed by private lenders, investment groups, or specialty mortgage companies rather than traditional banks.

Non-QM Loans Are Ideal For Borrowers Who:

Are self-employed
Rely on 1099 income
Have significant business write-offs
Earn income from multiple sources
Have recent credit events (bankruptcy, foreclosure, short sale)
Work on commission
Are real estate investors
Need asset-based qualification
Don’t fit Fannie Mae/Freddie Mac guidelines

If traditional doors have closed on you, Non-QM may open a much better one.

Types of Non-QM Loans

Lenders offer several Non-QM programs designed for different types of borrowers:

✔ Bank Statement Loans

Instead of tax returns, lenders use 12–24 months of bank statements to determine income.

✔ 1099 Income Loans

Specifically for independent contractors who receive 1099s instead of W-2s.

✔ Asset-Based Loans

Perfect for retirees or high-net-worth borrowers who have assets, not traditional income.
Income is calculated based on your assets.

✔ DSCR (Debt Service Coverage Ratio) Investor Loans

Designed for rental property investors.
Approval is based on the property’s potential rent, not your personal income.

✔ Interest-Only Loans

Allows lower monthly payments at the start, ideal for cash-flow-focused buyers.

✔ Recent Credit Event Loans

Borrowers can qualify 1 day to 2 years after bankruptcy, foreclosure, or short sale.

✔ ITIN Loans

For borrowers with an Individual Taxpayer Identification Number rather than a Social Security Number.

Non-QM = flexibility. And that’s exactly what many California and self-employed borrowers need.

How to Qualify for a Private or Non-QM Mortgage

Qualifying for a Non-QM loan is often much easier than qualifying for traditional financing, but lenders still require a clear financial picture.

Here’s what most private and Non-QM lenders look for:

1. Alternative Income Documentation

Traditional loans rely heavily on tax returns, W-2s, or paystubs.
Non-QM lenders allow a variety of income verification methods, such as:

Bank Statement Income Verification:

12–24 months of personal or business bank statements
Income is averaged
Expense ratios may be applied depending on the business type

1099 Income Verification:

12–24 months of 1099s
Sometimes paired with bank statements for accuracy

Asset-Based Qualification:

Verification of liquid assets
Assets converted into a calculation that shows ability to repay

Investor DSCR Loans:

Rental income compared to mortgage payment
DSCR must meet minimum standards (often 1.0–1.25+)

Good news: If your tax returns show low income due to write-offs, Non-QM lenders may ignore them entirely.

2. A Reasonable Credit Profile

You do not need perfect credit.

Typical minimums vary by program:

580–620 for some programs
640+ preferred
680+ for best pricing

Even if you have a recent bankruptcy or foreclosure, you may qualify, sometimes in as little as 12 months.

3. Down Payment / Equity Requirements

Non-QM loans usually require a larger down payment (or more equity if refinancing) because they carry more flexibility.

Typical down payment guidelines:

10–20% down for many borrowers
20–30% down for jumbo Non-QM
15–25% equity for refinances

Cash-out refinance options are available, but limits vary by lender and loan type.

4. Ability to Repay (ATR Rule)

Even though Non-QM loans allow flexibility, lenders still must determine that you can afford the loan.

This includes reviewing:

Income (via alternative documentation)
Assets
Credit
Debts
Housing history

As long as the lender can reasonably determine you can repay the loan, you may qualify.

5. Property Requirements

Most Non-QM lenders allow:

Primary residences
Second homes
Investment properties
Condos
1–4 unit properties
Some manufactured homes

Investor DSCR programs are especially flexible for rental properties.

What Borrowers Love About Non-QM Loans

✔ You no longer feel punished for being self-employed

Write-offs and business deductions no longer get in the way.

✔ You can qualify based on real cash flow

Not complicated tax numbers that don’t reflect your actual income.

✔ You can buy again after a credit event

Bankruptcy or foreclosure doesn’t mean you’re locked out of homeownership for years.

✔ Investors can grow portfolios faster

DSCR loans make investing more accessible.

✔ You can access flexible loan structures

Interest-only, low documentation, asset-based, and more.

✔ Faster approvals

Private lenders often move more quickly than big banks.

Potential Drawbacks (And How to Navigate Them)

Non-QM loans aren’t perfect for everyone. Here’s what to expect:

✘ Higher interest rates than traditional loans

This is the trade-off for flexibility.

✘ Larger down payment requirements

Lower risk for the lender, but higher upfront cost for the borrower.

✘ Fees may be slightly higher

This depends on the lender and loan structure.

✘ Not backed by federal agencies

Meaning guidelines can vary widely.

Still, for the right borrower, Non-QM is often the only path to affordable homeownership, and a smart one at that.

Are You a Good Candidate for a Non-QM Loan?

You might be a perfect fit if any of these sound familiar:

You’re self-employed with strong deposits but low taxable income
You receive most of your income through 1099s
You have multiple income streams
You own rental properties
You recently changed careers
You had a bankruptcy or foreclosure within the last 1–3 years
You need a jumbo loan but fall outside strict guidelines
You have significant assets but minimal traditional income
You want to qualify based on business cash flow

Non-QM lending was created specifically for borrowers like you.

How to Improve Your Chances of Approval

Here are steps you can take right now:

1. Organize your bank statements

Most lenders require full 12–24 month history.

2. Improve your credit where possible

Even a small score increase can earn you better terms.

3. Build your savings

A stronger down payment improves approval odds and pricing.

4. Limit large unexplained deposits

Lenders want clear, traceable financial activity.

5. Work with a lender who specializes in Non-QM

Experience matters, this is a specialized part of the industry.

The Bottom Line: Non-QM Loans Help Real Borrowers Get Real Mortgages

Non-QM loans offer real solutions for real people, especially in a state like California where income structures are often complex and property values are higher.

If you’ve been turned down by traditional lenders, or you know your financial picture is stronger than your tax returns suggest, Non-QM financing may be your key to homeownership or refinancing.

Ready to See If You Qualify for a Private or Non-QM Loan?

A Non-QM expert can help you review:

Your income documentation
Your credit profile
Your assets
Your goals
The Non-QM programs you qualify for
Your estimated loan terms and payments

How to Qualify for a Mortgage With Private / Non-QM Loans