Non-QM (non-qualified mortgage) lending is reshaping the mortgage landscape, creating fresh opportunities for borrowers who don’t fit the mold of traditional lending. Mortgage experts Jamie Gueltzow and Paul Apostolakis offer a wealth of insights on how non-QM loans can serve those traditionally underserved by conventional mortgage options, such as self-employed individuals, gig workers, and others with non-traditional income. This article explores how non-QM products can empower brokers and agents while expanding financing options for a growing segment of borrowers.
Understanding Non-QM Loans: Not Your Typical Mortgage
Non-QM loans offer an alternative to traditional “A-paper” loans backed by Fannie Mae and Freddie Mac. They serve borrowers who don’t fit the conventional mold, such as the self-employed, small business owners, and those with non-traditional income sources. As Paul explained, non-QM loans are “non-cookie-cutter” loans, designed for anyone who doesn’t fit into the small, rigid box set by conventional mortgage lenders.
Jamie noted that typical non-QM borrowers have solid financial profiles: a 740 FICO score, about 70% loan-to-value (LTV), and a history of responsible credit. Unlike in the past, today’s non-QM loans are far removed from the risky, subprime loans of the pre-2008 era. Instead, they offer borrowers flexibility without sacrificing financial security. With approximately 5% of the market currently non-QM, Jamie believes there’s potential to safely expand this share to around 15%.
Non-QM: Meeting the Needs of Today’s Workforce
The shift toward self-employment, gig work, and freelance jobs has introduced a large group of potential borrowers who don’t qualify for traditional mortgages. Non-QM loans use flexible qualifying methods, like bank statements or asset depletion, to assess income. This option allows self-employed borrowers to qualify based on actual income and assets rather than W-2s or tax returns, a major advantage in today’s evolving workforce.
Jamie highlighted the importance of adapting to these shifts. He noted that many self-employed individuals have solid incomes but don’t qualify on paper due to extensive tax deductions. Non-QM lending accommodates this reality, making it possible for those who could otherwise be left out to secure financing.
