Non-QM Loan FAQs

Bank statement loans allow self-employed borrowers to apply for a home loan without having to provide pay stubs and W-2's from the past two years of employment.  Lenders look at the borrower's bank statements to determine if they can produce sufficient income to warrant approval for a mortgage loan.  Here's a blog that can explain more.

Interest rates for bank statement loans tend to be higher than those for conventional loans. These loans are considered higher risk since they don’t require traditional income verification. Rates depend on factors such as your credit score, down payment, and the loan amount.

Like a traditional mortgage loan, you should maintain a good credit score (700 and up) to be approved for a bank statement loan.

With bank statement loans, the lender uses bank statements to analyze a borrower's income instead of using standard documentation. Lenders that offer bank statement loan programs will look at a borrower's bank over a 12 to 24 month time period to determine the borrower's net income, which is the amount of money earned after the borrower has paid taxes and business-related expenses.  Here’s a blog that helps explain this more.

NASB requires at least two years of self-employment, 12 months of consecutive bank statements from the same account, up to 90% max LTV, and the borrower must have a 50% maximum debt-to-income ratio. The maximum loan amount is $1,250,000.

Self-employed individuals or business owners who have at least 12-24 months of bank statements to show consistent deposits. Individuals with irregular income (like contractors, freelancers, or small business owners) cannot prove consistent income via tax returns or W-2s. People with good credit scores, though specific requirements may vary by lender.

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.

Income verification: Lenders review your bank statements (typically the last 12 or 24 months) to determine the average monthly deposits. If you're self-employed, lenders may also look at the cash flow in your business bank account and apply specific adjustments to calculate your income.

Credit score: Most lenders require a minimum credit score of around 700.

Down payment: Bank statement loans require a down payment of at least 10% with required mortgage insurance. 

Bank statements: Lenders typically require 12 or 24 months of personal or business bank statements to verify income and cash flow.

Identification documents: Lenders will ask for government-issued ID, proof of address, and sometimes Social Security information.

Credit report: A credit report will be checked to evaluate your creditworthiness.

Asset statements: Sometimes, you may need to provide additional statements or documents showing your savings or investments.

Lenders typically accept personal bank statements (if the borrower is self-employed or a freelancer) and business bank statements (if the borrower is a business owner). The statements should clearly show regular deposits that are consistent and sufficient to cover your monthly loan payment.

Lenders usually calculate income by averaging the deposits over the 12 or 24 months of bank statements. Some lenders may consider only business deposits if you are a business owner, while others may consider personal and business accounts. Adjustments can be made to account for non-recurring deposits or withdrawals (e.g., large lump-sum deposits that may not reflect your regular income).

The loan amount you can qualify for will depend on the average income calculated from your bank statements and your debt-to-income (DTI) ratio. Lenders typically set limits based on income and other factors, such as the type of property (primary residence, second home, investment property).

Bank statement loans often require larger down payments (typically 10%- 20% or more). The larger down payment helps offset the additional risk lenders take on since income verification is less traditional.

Primary residences: You can use a bank statement loan to buy a home you plan to live in.

Second homes: A bank statement loan may be used to purchase a vacation or second home.

Investment properties: Some lenders also allow bank statement loans to finance investment properties that generate rental income.

Flexible documentation: Bank statement loans are a good option for self-employed individuals or people with unconventional incomes who can’t provide traditional proof of income.

Fewer requirements: Compared to conventional loans, there are fewer requirements, such as not needing tax returns or W-2s.

Easier approval for non-traditional income: Those with non-salaried income sources (like contract or freelance work) may find qualifying easier.

Yes, bank statement loans can be used to refinance existing properties, whether a cash-out or a rate-and-term refinance.

The same requirements apply regarding bank statements, credit scores, and down payment.

A 1099 income loan is for self-employed or independent contract workers who have difficulty qualifying for a conventional mortgage loan. Lenders look at income from a 1099 instead of tax returns.

• The last 12 months of 1099-NEC income, less if 1099-NEC income is from the most recent employer
• Documentation of year-to-date income
• 700 minimum credit score
• 100% of 1099-NEC income considered

A 1099 loan is a good mortgage loan option for those that are self-employed, freelancers, contractors, recently switched from W2 to 1099; anyone who files taxes using a W-9 and cannot qualify under Agency guidelines.

Minimum 20% down with mortgage insurance approval.

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.

A DSCR loan is a type of non-QM loan used in real estate investing. The loan eligibility depends on the property’s income potential, not the borrower’s income. The Debt Service Coverage Ratio (DSCR) helps determine if a property makes enough money to pay its debts.

It's actually very simple to qualify for a DSCR loan. The property must generate enough rental income to offset the mortgage payment plus other expenses associated with the investment property. The minimum debt service coverage ratio required is between 1.1x and 1.2x, which means the property must produce between 10% and 20% net positive cash flow after all expenses have been deducted. A minimum loan amount of $175,000 and a 700 FICO score is also required.

To calculate the debt service coverage ratio (DSCR), divide the property's profit generated after deducting operating expenses or net operating income (NOI) by its total debt service, which refers to the annual loan payments. A DSCR of 1.0 indicates that the property's income is sufficient to meet its debt obligations. A DSCR above 1.0 suggests positive cash flow, while a ratio below 1.0 indicates negative cash flow.

A DSCR loan doesn’t require proof of personal income through tax returns or pay stubs.  A real estate investor just needs to show their ability to repay the lender by having a qualifying DSCR.

Lenders usually want a DSCR of 1.2 or more. This means the property makes 20% more money than needed for debt payments. However, some lenders may accept a lower DSCR depending on the property type and the risk involved.

No. Unlike traditional loans, DSCR loans focus on the property’s ability to generate income. Your personal income and credit score are not as important. However, some lenders may still ask for this information during application.

Yes. DSCR loans are made for real estate investors. They help finance rental properties, commercial properties, and other income-generating assets.

Yes. DSCR loans can be used for residential and commercial properties if the property generates income. However, the specific DSCR requirements may vary based on the property type.

The down payment needed can change. It usually falls between 20% and 30%, depending on the lender, property type, and DSCR. A higher DSCR may allow you to secure a lower down payment.

DSCR loans are typically for income-generating properties that are not in need of major repairs and are less commonly used for flips. However, if the property has the potential for long-term rental income, a DSCR loan may still be an option.

es. If tenants already occupy the property, you can boost the DSCR. This makes it easier to qualify for a loan.

The main benefit of a DSCR loan is that it helps real estate investors qualify for a loan. This analysis focuses on the property’s income potential, not on the investor's personal finances, making financing easier for investors with low personal incomes.

Traditional loans usually need a borrower's credit score, income, and other details. In contrast, DSCR loans focus on the income the property makes. DSCR loans are typically more flexible for real estate investors.

The approval process can change based on the lender and the loan's complexity. Usually, the approval and funding process takes 30 to 60 days.

Lenders consider DSCR loans at a higher risk, so they can set higher interest rates than traditional loans. The rate will depend on factors such as the DSCR, the property type, and the loan amount.

Yes, you can refinance a property with a DSCR loan. The property must make enough income to meet the DSCR requirements. A refinance may allow you to access better terms or pull equity from the property.

An investment property loan allows you to purchase real estate to rent out for additional income or flip for a profit. They generally have higher interest rates and stricter lending requirements than standard mortgages.

The main qualifying factors for securing an investment property loan are:

• Employment history: You must show proof of verified employment for a minimum of two years.
• Credit score: Your credit score will determine your down payment, rate, and ability to be approved. Most lenders require a minimum credit score of 620 to qualify, and a credit score of 720 or higher will get you the best rates.
• Debt to Income ratio (DTI): Your DTI is determined by dividing your gross monthly income by your total monthly debts. A DTI of 36% or less is ideal; anything above 50% may prevent you from qualifying.
• Down payment: You should be prepared to put down 20%-25% of the purchase price for an investment property loan. 

Depending on your credit, a down payment of at least 20% is required for an investment property loan.

An investment property is a real estate purchase made to generate income through rental income or appreciation and is not the investor's primary residence.

The three types of investment properties are:

• Residential: The most common form of investment property, these properties are purchased to rent out to tenants and earn monthly rentals. These can include single-family homes, apartments, condominiums, or townhomes.
• Commercial: These are properties purchased for business purposes, such as office space, retail stores, restaurants, etc. The investor may purchase an already existing property or develop from the ground up.
• Mixed-use: These properties can be used simultaneously for residential and commercial purposes. For instance, the ground level may be used for retail shops and the upper floors for residential units.

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.

A portfolio loan is a loan that a lender will keep in their portfolio, instead of selling to the secondary market.  A primary reason that these lenders keep the loans in their portfolio is to provide a lending option to those who may not fit secondary market eligibility guidelines and to help the local community. It’s part of their mission and purpose.

When borrowers who do not meet the criteria required for a conventional mortgage loan, such as those sold to Fannie Mae or Freddie Mac, a portfolio loan can be a more flexible option. Lenders offer these so that borrowers can get a loan, even though they may be self-employed, have a low credit score or have gone through a bankruptcy. These loans must be held and serviced by the lenders, as they cannot be sold in the secondary market.

Portfolio loan lenders like NASB will dig deep to find out about what caused your economic issues and what you’ve done to recover from it. This allows borrowers with blemishes on their financial history to have a chance at owning a home. Other situations that make a portfolio loan a good option include:

• Self-employed borrowers.
• Foreign nationals.
• Borrowers with high income, low credit.
• Borrowers without documented income but high net worth.

Because portfolio loans do not have to meet GSE (Government-Sponsored Enterprise) guidelines, the requirements for portfolio loans vary from lender to lender. The lender is assuming the risk, so they set the qualifications. Generally, if a borrower can show they have the ability to pay back the loan, can make a down payment, and has a FICO score and debt-to-income ratio above a certain threshold, they may qualify for a portfolio loan.

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.

A bridge loan allows you to access the equity in the home you currently live in, so you can make an offer on a new house with needing a sale contingency. Here's a blog that explains more about bridge loans.

The easiest way to think of how a bridge loan works is to provide you with the cash to pay off what you still owe on your current mortgage, plus a little more for a down payment on the new home. The loans are generally short-term.

• It makes cash available, so you get the home you want without waiting to sell or needing a sale contingency.
• It puts odds in your favor in a competitive market.
• If you don’t have cash for a down payment.
• Interest-only payments until your home is sold.

• May have to pay for an appraisal, along with associated closing costs and fees.
• Might own two homes with two mortgage payments for a while.
• Higher interest rates than conventional loans.
• Lenders usually require at least 20% home equity.

To qualify for a bridge loan, the loan amount must be at least $175,000, it must be used in conjunction with a primary or secondary home purchase, and a full appraisal is required. 

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.

A non-warrantable condo loan is what borrowers seek to purchase a condo when it doesn't meet conventional loan requirement and cannot be approved by government-backed entities like Fannie Mae and Freddie Mac. 

There are a number of factors that can contribute to a condo being tagged as non-warrantable, including:

• Ownership requires a membership, like a golf club.
• The project is new construction and not completed yet.
• One person or entity owns more than 10% of the total number of units.
• The condo allows for the majority of the units to be rentals and/or short-term rental units.
• The condo developer hasn’t ceded control of the owner’s association yet.
• More than 25% of the units in development will be used commercially.
• There is litigation of any kind tied to the project.

Non-warrantable condo loan requirements include:

• A minimum credit score of 680
• Last two years of verifiable income, including W-2s and tax returns
• A debt-to-income ratio (DTI) of no more than 45%
• Different rate and term options are presented
• Points and fees cannot exceed 3% of the loan amount

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.