Non-QM mortgage
Also: non-QM mortgage, non-qualified mortgage, non-QM loan
A mortgage that does not meet the Consumer Financial Protection Bureau's Qualified Mortgage (QM) standards. Typically used for borrowers with non-W-2 income, large equity positions, or recent employment changes.
A Non-QM mortgage is a home loan that does not satisfy the Qualified Mortgage rules under the CFPB’s Ability-to-Repay standard. The most common reasons are income documentation (bank-statement or asset-based underwriting instead of tax returns), DTI above the QM cap, loan terms exceeding 30 years, or features prohibited in QM loans such as interest-only periods. Non-QM lenders are not government-sponsored and retain more credit risk, pricing their loans 50 to 200 basis points above conforming rates.
Example: a consultant who left a tech company with $4 million of RSU proceeds and $600,000 of freelance income cannot document two years of consistent tax returns. A Non-QM lender underwrites her using 12 months of bank statements and $2 million of investable assets, producing a $2 million loan at 7.25% when a QM rate is 6.1%. The rate premium reflects the non-standard documentation path.
Common mistake: using a Non-QM loan when a tech employee with an RSU-heavy comp package could qualify for a QM loan by providing the RSU vesting schedule as supplemental income. Many QM lenders accept RSU income with a two-year history.
Non-QM matters at self-employed transitions, at large RSU-driven purchases, and when standard DTI calculations fail.