Non-QM loans, or non-qualified mortgage loans, refer to a category of mortgages that don't meet the criteria set by the Consumer Financial Protection Bureau (CFPB) for Qualified Mortgages (QM). Unlike traditional QM loans, which adhere to strict guidelines to ensure borrower ability to repay, non-QM loans offer more flexibility in underwriting criteria. This makes them suitable for borrowers who may not meet the standard requirements for various reasons, such as self-employed individuals with variable income or those with non-traditional sources of income. Non-QM loans often consider alternative factors in the underwriting process, such as bank statements, assets, or a larger down payment. While they can be a valuable option for certain borrowers, it's important to note that non-QM loans may come with higher interest rates to compensate for the increased risk.
