Need for Non-QM loan with pristine credit and a strong financial profile

The primary driver for high-credit, high-asset individuals utilizing Non-QM loans is often the inability to verify income using the standardized documentation (W-2s, pay stubs, tax returns) required for QM loans.

1. Self-Employed and Gig Economy Workers
High-income self-employed individuals, independent contractors, entrepreneurs, and small business owners frequently rely on Non-QM financing.

• Tax Write-offs: These borrowers often claim significant business deductions and tax write-offs, which legally lower their taxable income as reflected on federal income tax returns (1040s and W-2s). This reported taxable income may be insufficient to qualify for a QM loan, even if their actual cash flow is substantial.
• Alternative Documentation: Non-QM products overcome this barrier by accepting alternative documentation types, allowing for a clearer picture of the borrower’s ability to repay.
  • Bank Statement Loans: These programs are widely used, basing eligibility on the average monthly deposits reflected in the borrower’s personal or business bank statements over a period (typically 12 or 24 months), rather than tax returns.
  • 1099 Loans: Independent contractors can use 1099 income documentation to verify income.
  • P&L Statements: Some programs allow qualification based on profit and loss statements prepared by a Certified Public Accountant (CPA) or licensed tax professional.

2. High-Asset, Limited Income Borrowers (Asset Qualifiers)
Retired professionals and high-net-worth individuals often have substantial investment portfolios but little or no verifiable monthly income via traditional sources.

• Asset Depletion/Utilization Loans: These Non-QM programs are uniquely focused on borrowers who have high asset balances but cannot meet standard income verification requirements.
  • These loans convert unrestricted liquid assets (such as stocks, bonds, mutual funds, savings, and retirement accounts) into a qualifying monthly income.
  • For instance, a qualifying monthly income may be calculated by dividing eligible assets (minus down payment, closing costs, and required reserves) by a specific amortization period, such as 84 months.
  • The Asset Qualifier product explicitly states that qualification is determined solely based on the borrower’s liquid or liquidatable assets, and no income or employment verification is needed.
  • This is an attractive option for affluent retirees, such as a retired hedge fund manager purchasing a home while maintaining investment liquidity.