Non QM Loans Guide

Non-Qualified Mortgage often called Non QM loans have emerged as a vital financing option for borrowers who do not meet the stringent requirements of traditional Qualified Mortgage loans. Non QM loans were introduced after the 2008 financial crisis under the Dodd-Frank Act, QM loans adhere to strict guidelines set by the Consumer Financial Protection Bureau (CFPB), such as a maximum debt-to-income ratio of 43% and verified income documentation. Non-QM loans offer flexibility for self-employed individuals, real estate investors, borrowers with bad credit, or those with non-traditional income sources.

According to Bankrate, Non-QM loans account for approximately 4.5% of the U.S. mortgage market in 2025, with growing popularity due to their adaptability. We published this guide to explore Non-QM loans, detailing the top five non qualified mortgage programs, listing the top ranked lenders for Non-QM loan rates, APRs, and closing costs, and presenting three case studies to illustrate real-world applications.

Why Non-QM Loans Are the Hottest Alternative Mortgage Program in 2025

Non-QM loans are mortgages that do not conform to QM standards, allowing lenders to use alternative documentation or underwriting criteria.

These non qualified mortgages cater to borrowers such as freelancers, gig economy workers, real estate investors, and those with lower credit scores.

While Non-QM loans offer greater flexibility, they often come with higher interest rates (typically 5.5%–8.5% APR in 2025), higher fees, and sometimes unique terms like interest-only payments or balloon payments.

Non-QM loans are particularly appealing for:

• Self-employed borrowers: Using bank statements instead of tax returns.
• Real estate investors: Qualifying based on property income (e.g., DSCR loans).
• Borrowers with bad credit: Accessing homeownership or refinancing with scores as low as 580.
• High DTI borrowers: Qualifying with DTIs up to 50% or higher.

Non-QM loans are offered by portfolio lenders, who hold loans in-house rather than selling them to Fannie Mae or Freddie Mac, allowing for creative underwriting.

Top 5 Non-QM Loan Programs

Below are the top five Non-QM loan programs in 2025, each designed to address specific borrower needs:

1. Bank Statement Loans

Bank statement loans allow borrowers to qualify based on 12–24 months of bank statements rather than tax returns or W-2s. These loans are ideal for self-employed individuals or freelancers with irregular income. Lenders calculate income by averaging monthly deposits, often requiring a minimum credit score of 620 and a 10–25% down payment. APRs range from 6.5%–8.0%, with closing costs of 2–5% of the loan amount. Angel Oak is a leader in this space, offering loans up to $3 million with flexible DTI ratios.

2. No Doc Home Loans

No Documentation (No Doc) loans require minimal income verification, relying on creditworthiness, equity, or property cash flow. Popular among real estate investors and high-net-worth individuals, these loans have higher APRs (7.0%–8.5%) and require 20–30% down payments. The RefiGuide will connect you with No Doc Mortgage Lenders offering financing products with no income documentation required.  Consider no-doc HELOCs with funding in as little as seven days, ideal for investors seeking quick capital.

3. Home Loans for Bad Credit

These loans target borrowers with credit scores below 680, often as low as 580. Lenders like Achieve offer loans with APRs of 7.5%–9.0% and LTV ratios up to 80%. Borrowers may need higher down payments (20–25%) or lower DTIs (below 40%) to offset credit risk. These loans are suitable for home purchases or refinancing to consolidate high-interest debt.

4. DSCR Loans

DSCR loans are designed for real estate investors, focusing on a property’s rental income rather than personal income. Lenders require a DSCR of 1.0–1.25, a credit score of 620+, and an LTV of 75–80%. APRs range from 6.375%–8.0%, with closing costs of 2–4%. Find non-QM lenders offering DSCR loans up to $5 million, ideal for portfolio expansion.

5. HELOC with No Appraisal

No-appraisal HELOCs use automated valuation models (AVMs) to estimate home value, speeding up approval. Lenders like West Capital Lending offer these with APRs starting at 6.97% and no closing costs for borrowers with 10% equity. Credit scores of 660+ are preferred, though some lenders accept scores as low as 620. These are home equity loans and HELOCs are ideal for debt consolidation or home remodeling and real estate investments.

Top 20 Non-QM Lenders in 2025

Below is a list of the best Non Qualified mortgage lenders in 2025, based on competitive rates, APRs, closing costs, and program variety.

1. Angel Oak Mortgage Solutions
   • APR: 6.5%–8.0%
   • Closing Costs: 2–5%
   • Specialties: Bank statement loans, no-doc loans, bad credit loans
   • Notes: Offers non QM loans up to $3 million, flexible DTI, min. credit score 660
2. Griffin Funding
   • APR: 6.375%–8.0%
   • Closing Costs: 2–4%
   • Specialties: DSCR loans, bank statement loans, no-doc HELOCs
   • Notes: Min. credit score 620, fast closings (10–15 days)
3. West Capital Lending
   • APR: 6.97%–8.5%
   • Closing Costs: 0–2%
   • Specialties: No-appraisal HELOCs, investment properties
   • Notes: Fast closing home equity loans and low closing costs
4. LendingOne
   • APR: 6.75%–8.25%
   • Closing Costs: 2–4%
   • Specialties: DSCR loans, no-income verification loans
   • Notes: Focuses on real estate investors, min. credit score 620
5. Newfi
   • APR: 6.5%–8.0%
   • Closing Costs: 2–5%
   • Specialties: No-doc loans, bank statement loans
   • Notes: Digital platform, flexible underwriting
6. Defy Mortgage
   • APR: 6.375%–7.75%
   • Closing Costs: 2–4%
   • Specialties: DSCR loans, high LTV (80%)
   • Notes: Min. credit score 620, investor-focused
7. Kiavi
   • APR: 6.75%–8.25%
   • Closing Costs: 3–5%
   • Specialties: DSCR loans, diverse property types
   • Notes: Supports non-warrantable condos, min. credit score 660
8. Lima One Capital
   • APR: 6.5%–8.0%
   • Closing Costs: 2–4%
   • Specialties: Non-QM loans, reserves required
   • Notes: Prefers experienced investors, min. credit score 620
9. Quontic
   • APR: 6.75%–8.5%
   • Closing Costs: 3–5%
   • Specialties: DSCR and Non QM, bank statement loans
   • Notes: Flexible for first-time investors, min. credit score 660
10. Northpointe Bank
    • APR: 6.5%–8.0%
    • Closing Costs: 2–4%
    • Specialties: Non-QM portfolio loans, bank statement loans
    • Notes: Digital application, min. credit score 620
11. Achieve
    • APR: 7.5%–9.0%
    • Closing Costs: 3–5%
    • Specialties: Bad credit loans, debt consolidation
    • Notes: Min. credit score 600, fast funding (10 days)
12. Truss Financial
    • APR: 7.0%–8.5%
    • Closing Costs: 3–5%
    • Specialties: No-doc HELOCs, bank statement loans
    • Notes: No appraisal required, funding in 7 days
13. Connexus Credit Union
    • APR: 6.75%–8.25%
    • Closing Costs: 2–4%
    • Specialties: No-appraisal HELOCs, bad credit loans
    • Notes: Min. credit score 620, membership required
14. PenFed Credit Union
    • APR: 6.5%–8.0%
    • Closing Costs: 2–4%
    • Specialties: No-appraisal HELOCs, bank statement loans
    • Notes: Min. credit score 620, fast closing (15 days)
15. Spring EQ
    • APR: 6.75%–8.5%
    • Closing Costs: 2–5%
    • Specialties: High-LTV HELOCs (95%), no-appraisal
    • Notes: Min. credit score 620, fast funding (14–21 days)
16. FBC Mortgage
    • APR: 6.5%–8.0%
    • Closing Costs: 2–4%
    • Specialties: Bank statement loans, DSCR loans
    • Notes: Min. credit score 620, no PMI with 10% down
17. LBC Mortgage
    • APR: 7.0%–8.5%
    • Closing Costs: 3–5%
    • Specialties: No-doc HELOCs, bank statement loans
    • Notes: Min. credit score 620, investor-focused
18. New Silver
    • APR: 6.375%–7.75%
    • Closing Costs: 2–4%
    • Specialties: DSCR loans (low DSCR 0.75), no-doc loans
    • Notes: Min. credit score 620, fast funding
19. Rocket Mortgage
    • APR: 7.0%–8.5%
    • Closing Costs: 3–5%
    • Specialties: Bad credit loans, no-appraisal HELOCs
    • Notes: High credit score requirement (740 for 90% LTV)
20. Navy Federal Credit Union
    • APR: 6.5%–8.0%
    • Closing Costs: 0–3%
    • Specialties: High-LTV loans (100%), no-appraisal HELOCs
    • Notes: Military members only, min. credit score 620

Note: APRs and closing costs vary based on credit score, loan amount, and market conditions. Contact non qualified mortgage lenders for personalized quotes.

Case Study 1: Self-Employed Home Buyer Getting a Bank Statement Loan

Background: Sarah, a 35-year-old freelance graphic designer, wanted to purchase a $450,000 home in Austin, Texas. As a self-employed individual, her tax returns showed low income due to deductions, making QM loans challenging. She had a 680 credit score, $60,000 in savings, and a DTI of 35%.

Solution: Sarah applied for a bank statement loan with Angel Oak Mortgage Solutions. She provided 24 months of business bank statements, showing an average monthly income of $8,000. Angel Oak approved a $360,000 loan (80% LTV) with a 7.0% APR and 3% closing costs ($10,800). The loan required a 20% down payment ($90,000).

Outcome: Sarah purchased the home and moved in within 30 days. The bank statement loan allowed her to qualify based on cash flow, bypassing tax return limitations. Her monthly payment was $2,394, affordable given her income.

Case Study 2: Real Estate Investor Seeking a No Doc Loan

Background: Michael, a 42-year-old investor with a 720 credit score, sought to buy a $300,000 rental property in Phoenix, Arizona. With multiple income sources and a complex financial portfolio, he preferred a no-doc loan to avoid extensive documentation. He had $100,000 in cash reserves.

Solution: Michael approached Truss Financial for a no-doc HELOC. The lender used an AVM to value the property, approving a $210,000 loan (70% LTV) with a 7.5% APR and 4% closing costs ($8,400). The loan required a 30% down payment ($90,000) and no income verification.

Outcome: Michael closed in 10 days, using the HELOC to fund the purchase and renovations. The property generated $2,500 monthly rent, covering the loan payments and yielding a profit. The no-doc loan’s speed and simplicity suited his investment strategy.

Case Study 3: Homeowner with Bad Credit Refinancing

Background: Lisa, a 50-year-old homeowner in Miami, Florida, had a 580 credit score due to past medical bills. She owned a $400,000 home with $200,000 in equity and carried $15,000 in high-interest credit card debt (23% APR). She wanted to refinance her $150,000 mortgage (8.5% APR) and consolidate debt.

Solution: Lisa applied with Achieve for a bad credit home loan. Achieve approved a $240,000 loan (60% LTV) with an 8.0% APR and 4% closing costs ($9,600). The loan paid off her existing mortgage ($150,000), credit card debt ($15,000), and provided $75,000 in cash. She needed a 25% equity cushion due to her credit score.

Outcome: Lisa’s new monthly payment was $1,833, lower than her combined mortgage and credit card payments. Refinancing saved her $400 monthly, and consolidating debt improved her cash flow. Her credit score began improving with timely payments.

Pros and Cons of Non Qualified Mortgages in 2025

In 2025, Non-Qualified mortgage loans offer significant advantages for borrowers who don’t fit traditional mortgage criteria. A key pro is their flexibility, catering to self-employed individuals, real estate investors, and those with credit scores as low as 580. Programs like DSCR loans, prioritize property income over personal finances, enabling investors to expand portfolios without extensive documentation. Bank statement and no-income verification loans further simplify qualification for freelancers or complex earners, with APRs ranging from 6.375%–8.5%. Non-qualified mortgages also allow higher debt-to-income ratios (up to 50%) and diverse property types, including short-term rentals.

However, cons include higher costs, with APRs often 1–2% above QM loans and closing costs of 2–5%. Riskier terms, such as interest-only or balloon payments, can strain finances if not managed. Borrowers with lower credit face steeper rates (7.5%–9.0%), and portfolio lenders may impose stricter equity requirements (20–30% down). The niche market means fewer lender options, requiring careful comparison, as noted with non QM lenders. While Non qualified mortgages unlock homeownership and investment opportunities, borrowers must weigh higher costs and terms against their financial goals, ideally consulting advisors to navigate risks.

Can I Apply for a Non-QM Loan?

Non-qualified loans are mortgages that do not adhere to the lending regulations established by the Consumer Financial Protection Bureau (CFPB). Specifically, non-QM loans enable brokers and lenders to assess a borrower’s ability to repay the loan through alternative methods that might not be acceptable under traditional rules. This translates to a less stringent application review process in certain instances, providing proof of employment or income may not even be necessary to qualify for a non-QM loan. The RefiGuide can match you with competitive non QM loan lenders online with no application fee or obligation.

How Are Non QM Investor Loans​ Helping People Buy Rental Properties?

Non-QM investor loans, such as Debt Service Coverage Ratio (DSCR) loans, are empowering individuals to purchase rental properties in 2025 by offering flexible financing tailored to real estate investors. Non QM investor loans prioritize a property’s rental income over personal income, requiring a DSCR of 1.0–1.25. This allows real estate investors with complex income profiles, like self-employed individuals or those with multiple income streams, to qualify without extensive personal documentation. With APRs ranging from 6.375%–8.5% and LTV ratios up to 80%, these loans enable investors to leverage property cash flow to secure financing for single-family homes, multifamily units, or short-term rentals. Non QM  investor lenders accept credit scores as low as 620, broadening access

Takeaways on Non QM Loans in 2025

Non-QM loans provide essential flexibility for borrowers who fall outside traditional mortgage guidelines. The top five programs—bank statement loans, no-doc loans, home loans for bad credit, DSCR loans, and no-appraisal HELOCs—cater to diverse needs, from self-employed buyers to investors and those with credit challenges. The top 20 lenders, such as Angel Oak, Griffin Funding, and Discover, offer competitive rates and terms, with APRs ranging from 6.375%–9.0% and closing costs of 0–5%. Case studies demonstrate how Non-QM loans enable homeownership, investment, and debt consolidation. Borrowers should compare lenders, assess terms, and consult financial advisors to secure the best Non-QM loan for their needs.

References

• Dream Home Financing. (2024, January 3). Best non-QM lenders for 2025. https://dreamhomefinancing.com/non-qm-lenders/
• Mohtashami, L. (2020, September). Non-QM loans remain a niche product. HousingWire, as cited in Bankrate. https://www.bankrate.com/mortgages/non-qm-loans-return-for-self-employed-borrowers/
• RefiGuide. (2025, March 29). Best no doc mortgage lenders in 2025. https://www.refiguide.org/no-doc-mortgage-lenders/

Note: The updated article offers 2025 APR ranges, closing costs, and a comparison with other Non-QM loans, enhancing its relevance to the broader Non-QM discussion. Always verify non QM lender terms, as rates and costs fluctuate.