What is the definition of a Non-QM Loan?

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Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
There have been an abundance of new programs to hit the market and they are being labeled as Non-QM loans. Back in the 2003-2008 era we had these terms that are no longer used today called SISA, SIVA or NINA. Very popular as well during that time period were also Hard Money loans, we never heard of these "Non-QM" home loans. Let's break everything down below:

What does Non-QM mean? Non-QM is a fancy acronym for Non Qualified Mortgage. Basically a mortgage that doesn't fit within conventional, jumbo, FHA, VA or USDA guidelines. There's something about either the borrower's criteria or the property they are purchasing preventing it from being financed through traditional means. Once you find this out, it's time to get creative.

I have been working with these loans for many, many years as many of the members here at LoanSafe have experienced economic events in the past or have something unique about them. Something I've been known for is how to avoid a hard money loan. And there are certain cases where Hard Money is the only option but you want to make sure you've exhausted your Non-Qualified Mortgage space before you enter that realm. Hard Money loans are notorious for having the highest costs and interest rates in the industry and mainly designed to be short term financing for investors.

Within the LoanSafe realm we have access to just about every investor in the marketplace and each one is different. One may offer the best deals on after foreclosure, bk, short sale. Another investor may be better with Bank Statement, Self-Employed and No-Income loans for investment properties.

It takes not only an educated loan officer to understand these products but one that has worked in the trenches and made the impossible, possible before. Because these programs are still so new, many of your ABC loan officers have never ran into the unique situations and even though they may think they can do it, they have still never funded one. The other warning I have to give to not only our members but visitors of the site is that some lenders only offer certain products. I had a client call me recently because AXOS bank (bank that he was going to prior to this) denied his loan because his foreclosure wasn't seasoned a full 7 years, it was just shy of 6 1/2. That bank denied his home loan and he reached out to me to help save the deal. Originally he thought he was going to have to go Portfolio (Non-QM) financing with higher rates but we were able to fit him into an FHA product and get amazing terms.

With what I've mentioned above, why would someone ever go Hard Money? Well, there are certain situations where that may be the only option. For example if you have a credit score of 500 with serious derogatory on credit and don't want to provide any income documentation at all, you may be stuck with hard money. If you're looking to build a house that is halfway complete but has construction loans already against it, you need hard money. Obviously there is still a need for these types of lenders but the products that they notoriously market now are being offered by many competitors only with much better terms.

Do you have a situation that isn't normal?
Have you avoided trying to buy a home because you can't qualify for conventional or FHA?
Are you self-employed but write off a large amount of taxes?
Do you have a large amount down but don't want to show any income when purchasing an investment property?
Do you have a foreclosure, short sale or bankruptcy preventing traditional financing?

If you answered yes to any of the questions below, it may be time to research what is available. If you don't want to wait to purchase a home, it can happen. Nearly all of the loans that I have mentioned above do not have a pre-payment penalty or balloon payment (like many Hard Money loans do).

Call today at 619-379-8999 and we can go over different options depending on your unique scenario. If you prefer e-mail: [email protected]
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