Non-QM Refinancing: How It Works
What Is Non-QM Refinancing?
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.
Pros
- Flexible qualification requirements
- Non-traditional income sources accepted
- Alternative income documentation allowed
- Customizable loan terms
Cons
- May have larger down payment or equity requirements
- Repayment terms may be stricter than conventional programs
- Potential for higher closing costs
Talk to our mortgage experts today about finding the right loan for you.
Alternatives to Non-QM Refinancing
- Replaces a non-qualified mortgage with a conventional loan
- Requires traditional income documentation
- Ideal for borrowers who now qualify under standard guidelines
- Special programs available for some borrowers
- Flexible qualification requirements
- Backed by the VA, FDA, or USDA
- Replaces your existing mortgage with a new, larger loan
- You get the difference in cash
- Requires sufficient equity in the property
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
Can I refinance my home with a non-QM mortgage if I have previously had a foreclosure or bankruptcy?
Can I choose between fixed and adjustable-rate non-QM refinancing programs?
What is the appraisal process for non-QM refinancing?
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