Non-QM Refinancing: How It Works

Non-QM Refinancing: How It Works
Non-QM refinancing lets self-employed borrowers and others who don’t fit traditional lending guidelines change their loan terms. See how to refinance your home with a non-qualified mortgage below.
Non-QM Refinancing: How It Works

What Is Non-QM Refinancing?

Non-QM refinancing programs are designed for borrowers in unique financial circumstances, like:

Homeowners with non-traditional incomes 

Non-QM refinancing allows borrowers with self-employed, freelance, or business income to refinance without the standard documentation required by other programs.

Borrowers with less-than-perfect credit

Non-QM refinancing also caters to homeowners who need credit flexibility and want to rebuild their financial standing after bankruptcy or foreclosure.

Homeowners with unique property types

This program allows borrowers to refinance unique property types, like non-warrantable condominiums, mixed-use properties, and rehab projects.

What Can Non-QM Refinancing Be Used For

Two common types of VA refinances are streamline refinancing and cash-out refinancing. Here’s how they compare.

Switching loan types 

Non-QM refinancing can be used to switch loan types, such as converting an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.

Leveraging home equity 

This program can also be used to access your home equity by taking out a new loan that is larger than what you owe and receiving the difference in cash.

Refinancing investment properties

For real estate investors, non-QM refinancing can provide a practical way to manage financing across multiple properties.

NYFTY Lending Loan Pros

Pros

  • Flexible qualification requirements
  • Non-traditional income sources accepted
  • Alternative income documentation allowed
  • Customizable loan terms
NYFTY Lending Loan Cons

Cons

  • May have larger down payment or equity requirements
  • Repayment terms may be stricter than conventional programs
  • Potential for higher closing costs

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Alternatives to Non-QM Refinancing

Conventional Mortgage Refinancing

  • Replaces a non-qualified mortgage with a conventional loan
  • Requires traditional income documentation
  • Ideal for borrowers who now qualify under standard guidelines 
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Government-Backed Refinancing

  • Special programs available for some borrowers
  • Flexible qualification requirements 
  • Backed by the VA, FDA, or USDA
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Cash-Out Refinancing

  • Replaces your existing mortgage with a new, larger loan
  • You get the difference in cash
  • Requires sufficient equity in the property  
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How Do I Know If Non-QM Refinancing Is Right for Me?

You have irregular or non-traditional income

Non-QM refinancing allows you to use 1099s, profit-and-loss statements, and other alternative forms of income verification.

You have a higher debt-to-income (DTI) ratio

Non-QM refinancing has relaxed debt-to-income ratio requirements, which is ideal for those who have existing debt but also strong earning potential or substantial assets.

The property you’re refinancing doesn’t meet conventional loan standards

If you're refinancing a unique property that doesn't fit government-backed programs, like a fixer-upper or a non-warrantable condo, non-QM refinancing could be a good fit.

When Is the Best Time to Use Non-QM Refinancing?

The best time to use non-qualified mortgage refinancing is when conventional refinancing programs require documentation you can’t easily provide, like W-2s from an employer with a federal tax ID number. This program allows you to verify your income and ability to repay with unconventional documentation, like business or personal bank statements, brokerage statements that show investment holdings, and 401(k) or other retirement account statements.

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FAQ

One of the main advantages of refinancing with a non-QM loan is that it offers flexibility for borrowers who don’t meet strict traditional lending criteria. If you’ve had a past bankruptcy or foreclosure, you may still be eligible if you can provide detailed documentation of your financial stability.
Non-QM refinancing programs offer both fixed and adjustable-rate mortgage (ARM) options, so you can choose the loan type that fits your needs. While a fixed-rate mortgage offers predictable monthly payments for the entire loan term, ARMs have attractive introductory interest rates that can make the program more affordable in the beginning. The latter is ideal if you expect your financial circumstances to change, or if you don’t plan on staying in the property long-term.
The appraisal process for a non-QM refinance closely mirrors that of a standard mortgage. A licensed or certified appraiser will evaluate your home’s condition and compare recent sales to determine the property’s market value. This allows us to confirm your equity and tailor loan terms to meet your specific needs.
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