Your Ultimate Guide to Non-QM Mortgage Lenders
What is a Non-QM Mortgage?
A non-QM (Non-Qualified Mortgage) mortgage is a type of loan that doesn’t meet traditional (remove typica) lending standards and requirements, which are set forth by the Consumer Financial Protection Bureau (CFPB). This means that non-QM loans allow lenders to be more flexible with their standards and requirements for borrowers.
As of 2023, there are an estimated 73.3 million freelancers in the United States. This is up from just 57.3 million in 2017, a more than ~20% increase. The number of freelancers, self-employed, and gig economy workers is only projected to increase, gaining about 3 million more per year.
If you’re a part of that group of entrepreneurs, self-employed individuals, independent contractors – or even retirees, foreign nationals and real estate investors – and you’re interested in investing in real estate, you can understand how difficult it is to qualify for a traditional mortgage without traditional income streams.
Many mortgage lenders (Defy excluded) and banks won’t even consider your application if you don’t have W-2’s or an extended income history – and if you’re writing off a bunch of expenses to reduce your taxable income, your adjusted gross income can look a lot lower than your actual take-home income. Rather than hastily judging or penalizing those whose paperwork does not tell the whole story, some lenders, like Defy Mortgage make a more nuanced assessment of creditworthiness and provide borrowers with alternative means to qualify.
A thoughtful, holistic evaluation of loan applicants provides a pathway to homeownership, financial empowerment, and opportunity for those entrepreneurs, self-employed individuals, independent contractors, retirees, foreign nationals and real estate investors who previously found the process unnecessarily difficult.
How Was This List Formed?
Our list looked at many factors to help determine who the best non-QM mortgage lenders and brokers are in the industry, including total loan volume, good reviews, experience of employees, rate transparency, awards, overall brand message and more. Please note that this list is in no particular order.
Who Are the Best Candidates for Non-QM Loans?
Self-employed individuals, business owners, foreign nationals, real estate investors, high net worth individuals, retirees, and those seeking alternative documentation are among the groups that might be interested in applying for a non-QM loan. This can also include but is not limited to the following personnel: freelancers, independent contractors, artists, hourly wage earners, doctors in private practice, truck drivers/Uber/Lyft drivers, etc.
Additionally, borrowers with a recent credit event may also qualify for a non-QM loan. A credit score is essentially just a snapshot in time, and depending on the circumstances regarding a specific credit event, that snapshot may provide only limited insight into the borrower’s true creditworthiness. As a result, as long as borrowers can meet other criteria, any non-QM lenders offer borrowers with low credit scores the opportunity to take out a loan and start building wealth in real estate.
The Top 15 Non-QM Mortgage Lenders and Brokers
Fairway Independent Mortgage Company was named the #1 company in mortgage origination for customer satisfaction by J.D. Power.
Fairway Independent Mortgage was founded by Steve Jacobson in Wisconsin in 1996 with only a handful of employees. Today, they have over 6,800 team members at more than 650 locations across the United States. Their total loan volume was $27.5 billion in 2023. Since they offer loans in all 50 states, their coverage area is wide. Most interested borrowers will have no issues finding someone to speak to at a branch.
It was also listed as the best place to work in 2022 and 2023 on TopWorkplaces.com. This is thanks, in part, to its lateral structure: anyone at the organization can talk to executive level employees at any time, regardless of rank or seniority. A relentless dedication to culture and customer service has allowed Fairway Independent Mortgage Company to thrive.
Like many lenders in the non-QM space, Angel Oak Mortgage Solutions’ stated purpose is to assist underserved borrowers, primarily the self-employed, who have limited access to the wealth-building opportunities of homeownership. Angel Oak has headquarters in Atlanta, Georgia and an operations center in Irving, Texas (part of the Dallas Fort Worth metro area).
They are one of the largest originators of non-QM loans with the ability to originate loans in 47 states, including Washington D.C. Some of their offerings include “bank statement elite,” loans, which have higher credit score requirements and a higher total loan amount of $3.5 million, bank statement loans, DSCR loan, 1099 income loan, P&L loan, bank statement HELOCs, and more.
They have over 1,000 Google reviews with a 4.8 star average as of February 2024.
Mark Cohen is the largest mortgage broker in the United States, handling over $15 billion in volume over the course of his career. Mark has been in the mortgage industry for over 35 years. He leads his team at Cohen Financial with a mission to provide exceptional customer service and best-in-class loan solutions for home and commercial purchases, refinancing, home equity, and construction loans.
He got his start in the mortgage business by partnering with his mother, Gloria Shulman, in 1985. Mark Cohen still manages the loan process personally with a team of only 11 people, allowing the business to pivot as quickly as possible to the demands of the industry.
As the #1 non-QM originator in the US, Cohen Financial Group refers to themselves as the “non-QM loan experts.” The Cohen Financial Group team recognizes that the expansion of the gig economy means that the overall demographic of borrowers is shifting. The needs of borrowers today aren’t the same as they were back in the day. To accommodate, Mark has close relationships to lenders who offer non-QM loan programs.
In 2023, Mark and his team closed a total of $345 million in non-QM loans for self-employed borrowers in California. Whether you’re self-employed, have limited proof of income, or are a foreign national, Cohen Financial Group has non-QM loans available up to a maximum of $8M. Although the company is recognized as a mortgage broker for high-end Southern California properties, he has made it clear that the loan amount is inconsequential and he lends his expertise to all homebuyers and property owners.
In terms of the speed of processing, A&D Mortgage is one of the best in the business. Their primary focus is on fast turnaround times. They boast that each step of the loan process takes fewer than 24 hours each, for as fast as a 4-day close: disclosure, underwriting, conditions, and closing.
They emphasize speed, collaboration, and communication. If you request to speak to a representative, they’ll have one available within 30 minutes.
A&D Mortgage is licensed in 45 states, which excludes North Dakota, Vermont, Hawaii, Alaska, and Minnesota. On their website, they offer “Conventional, Government and Non-QM products, including Bank Statements, Jumbo, and Foreign National programs.”
Since 1983, Prosperity Bank has been serving retail and business customers all throughout Texas and Oklahoma. Not only do they have mortgages, but they offer a full suite of banking products that can cover a wide variety of needs. Based in Houston, Texas, Prosperity Bank also has 242 physical locations to better serve their customers no matter where they are within the bank’s coverage area.
When it comes to mortgages, their team of award-winning mortgage experts are consistently recognized as the best in the business. They offer several types of loans to cater to an assortment of borrowers that include conventional, FHA, VA, and non-QM loans. Out of the top 10 non-QM loan originators of 2023, two of them were from Prosperity Bank’s team, Spiro Petritsis and Blair J Beard. These two originators brought in a combined total of $464 million worth of non-QM loans in 2023 for the bank.
For borrowers whose circumstances don’t fit into the guidelines set by Fannie Mae and Freddie Mac, Prosperity Bank offers portfolio loans to accommodate, which include one-time-close construction loans, purchase/refinance plus improvements, and lot loans. Additionally, for those who are ITIN holders or non-residents with SSNs, they have a specially designed program called the Home Ownership Possibilities Program (HOPP) to expand their mortgage offerings to a more diverse demographic.
Whether you’re purchasing a home or remodeling one, Prosperity Bank can help guide you through the home loan process. No matter the type of mortgage you’re looking for, they have a variety of options to suit your needs and their mortgage experts can help you choose the right home loan for you.
Featured in the Wall Street Journal and Bloomberg, Insignia Mortgage refers to themselves as the “California Loan Experts.” Since 2012, Insignia Mortgage has funded over $5 billion in loans all across California.
Insignia Mortgage recognizes that most of their borrowers have unique circumstances that don’t allow them to qualify for a conventional mortgage. Their individualized lending approach takes into account challenges that their clients face as non-traditional borrowers, such as self-employed individuals and foreign nationals. Some of their specialty non-QM products include: No tax return loans, foreign national loans, interest-only loans, investment property loans, and other complex loans. Since Insignia caters to high-net-worth clientele, they also offer larger-than-average maximum loan amounts, such as up to $25 million for foreign national loans and up to $45 million for developer loans.
Additionally, Insignia Mortgage offers the options of purchase, refinance, and even bridge loans to accommodate the needs of a wide array of borrowers. In a typical month, they close 11 purchase loans and 12 refinances both with an average loan amount of over $2 million.
Insignia Mortgage is the country’s #1 mortgage broker by loan size. Its founders, Damon Germanides and Chris Furie are ranked number 3 and 4 respectively for the top 2023 non-QM loan originators in the US by Scotsman Guide. The co-founders brought in a total of $480.47 million in non-QM sales volume last year and have a combined 50+ years of experience in the mortgage industry.
Defy Mortgage is a non-bank lender with a simple, clear mission: to empower dreams, enrich lives, and elevate the mortgage experience for non-traditional borrowers, such as foreign nationals, real estate investors, business-owners, retirees, and more. An up-and-coming titan of the industry, Defy specializes in non-QM mortgages and is composed of a team with over 100+ years of combined industry experience helping non-traditional borrowers obtain home financing free of setbacks – whether borrowers are looking to purchase or refinance.
Obtaining a mortgage should be an empowering experience, where borrowers feel confident, informed, and in control every step of the way. Defy’s streamlined and secure technology, combined with their customer-centric methods, forms the cornerstone of Defy Mortgage’s superior borrower experience.
Considering that the number of gig workers is at an all-time high, Defy understands that borrowers today need different options than what traditional lenders are offering. Challenging conventional mortgage lending standards is a key differentiator in this economy. Some of their non-QM mortgage products include: bank statement loans, interest-only options, DSCR loans, foreign national loans, asset depletion options and more.
Driven by a passion to challenge the status quo and create a new era of lending that puts the power in the hands of borrowers, their strong understanding of the current market and the CEO, Todd Orlando’s, 25+ years of experience in the mortgage and banking space puts them on the map.
Dustin Rosenberg and Jonathan Yoo of Convoy Home Loans met while they were working for the same brokerage in San Diego. They founded Convoy Home Loans in 2021 as a way of servicing non-conventional borrowers, who they saw as an underserved group.
With headquarters in El Segundo and a new branch in San Diego, Convoy primarily specializes in California real estate. Since they – like many other non-QM originators – have a network of preferred partners, this offers them more flexibility when it comes to qualifying. They can use cross-collateralization, cryptocurrency, bank statements, asset depletion, and more.
Convoy Home Loans offers the following loan types according to their website:
- 30 year fixed rate mortgage
- 15 year fixed rate mortgage
- Adjustable rate mortgages
- FHA loans
- VA loans
- Jumbo loans
- Super jumbo loans
- 40 year interest only
- Short term rental loans
NexBank is one of the oldest banks on this list, since it was founded in 1922. It is a privately held state chartered bank overseen by the FDIC. Since 1922, it has undergone many changes. In 1999, it became Heritage Savings Bank and morphed into a mutual savings bank. In 2002, it became a stock savings bank and morphed into Heritage Bank. When it was acquired by Highland Capital in 2005, and then became NexBank.
Today, NexBank is the largest privately held bank in Texas. In 2023, their total loan volume was about $10.5 billion, with $2.5 billion in non-QM volume alone.
Their three main lending categories are industrial, commercial, and mortgage banking. However, their website doesn’t state official terms for these loans or provide any guidance on what potential borrowers can expect. Additionally, it’s a little tough to navigate, so NexBank’s ranking on our list took a significant hit as a result.
Acra Lending, just like Defy Mortgage, was specifically formed for the purpose of serving non-QM borrowers. They offer their services through four verticals: Wholesale Lending, Consumer Direct Lending, Investor Lending, and Correspondent Lending.
Most borrowers will be interested in consumer direct and business lending in the United States, and Acra serves almost every state in the US, including Washington D.C. but excluding North Dakota, South Dakota, and Alaska.
With headquarters in Lake Forest, California, Acra Lending is one of the top non-QM lenders, having done about $2.1 billion in total non-QM volume in 2023. Additionally, they specialize exclusively in non-QM lending, so if you’re looking for a lender who has specificity with just one loan type, Acra Lending might be a good fit for you.
American Pacific Mortgage was founded in 1996 with the goal of creating experiences that matter for their customers and employees.
Headquartered in Roseville, California, American Pacific Mortgage has over 3,500 employees, 1,700 loan originators, and 200 branches across the United States, in 49 states. From 2012 to today, they’ve ranked as a top lender on Scotsman Guide for volume.
Their loan options are diverse, ranging from first time homebuyer loans to short-term bridge financing. If you’re looking to buy a home in a competitive market, they also offer a “cash buy” option, which will allow you to waive appraisal and financing contingencies up to the amount that you’re approved for. This will allow you to make a cash offer on your dream home, and then you’ll secure financing after the offer has been accepted (which lowers the overall cost of the service to only 1% of the loan amount). Since this can be a competitive advantage in your area, the 1% fee might be more than offset by the lower purchase price.
Headquartered in Cleveland, OH, CrossCounty Mortgage cleared $37 billion in total loan volume in 2023, with $1.2 billion in non-QM volume, making it one of the top ten largest non-QM lenders according to Scotsman Guide.
CrossCountry started as a mortgage broker in 2003 with the goal of delivering the best possible customer service to its clients. They’ve regularly ranked as one of the top-producing lenders in the nation.
Guaranteed Rate was founded in Chicago in 2000 by Victor F Ciardelli III, and its name is familiar if you’re a fan of baseball: Since November 2016, the home of the Chicago White Sox has been Guaranteed Rate Field (formerly Comiskey Park and U.S. Cellular Field).
According to Inside Mortgage Finance, Guaranteed Rate is the second largest retail mortgage lending company. Other sources say that they’re anywhere from the third to the fifth largest, but exact numbers aren’t 100% clear. Either way, they own the “rate.com” website domain, which costs millions of dollars alone – so they’ve got the money to back up and support major loans.
Either way, Guaranteed Rate performed $1.2 billion in non-QM loans in 2023, making it one of the biggest and most recognized operators in the non-QM space.
LoanStream Mortgage has headquarters in Irvine, California. It was founded in 2001. They have over 70 different home loan products that include Fannie, Freddie, and government-backed loans (FHA, VA, and USDA) as well as their own “NanQ/Non-QM” loan products.
LoanStream’s non-QM products are actually called “NanQ,” which are proprietary. They include:
- DSCR
- Full Doc / Alt Doc
- Bank Statement
- Fixed, ARM, and Interest Only
- High LTVs and Lower FICOs
- Business Owners, Investors
- VOE
- 40 Year I/O
- TRID only (non-Business Purpose) Temp Buydown – 2/1 & 1/0 option
They also offer more information on the going rates, loan amounts, and specific qualifications through their “Correspondent LoanStream NanQ One Matrix,” which is accessible on their website.
Having done over $1 billion in non-QM lending in 2023, they’re one of the biggest lenders in the space.
Change Lending was named one of the largest non-QM lenders by Scotsman Guide in 2023.
Change Lending is technically a non-bank lender, with an official legal designation as a Community Development Financial Institution. A CDFI, according to the federal government, is a privately owned financial institution that promotes financial inclusion and economic development in poorer communities. The Treasury Department supplies CDFIs with federal funding, which helps them to provide more opportunities to low-income borrowers. CDFIs can also accept resources from individuals, corporations, and religious institutions.
Accordingly, Change has been able to give $25 billion in loans to more than 75,000 families, and over “70% of its loans have been to Black, Latino, and low- and moderate-income borrowers and communities.”
It has headquarters in Anaheim, California.
However, Change Lending has had its fair share of controversy. In 2023, Change Lending was accused of falsifying “information on its annual certification by mischaracterizing its loans,” according to former employee Adam Levine, who was a press secretary under George W. Bush as well as the former Vice President of Goldman Sachs. Since this ended up making national news, the company has released its own statements on the matter. Additionally, Change has made the news for providing Johnny Depp with a $3 million loan.
The Different Types of Non-QM Loans
Finally, there are a few different types of Non-QM loans, such as DSCR, Bank Statement, P&L, Asset Depletion, Interest Only, Foreign National Loans, Construction Loans and Fix-and-Flip Loans. In this section, we’ll provide a short breakdown of each so that you can find the correct product for your situation.
DSCR
The debt service coverage ratio (DSCR) measures a property’s ability to cover its mortgage debt obligations using its annual gross rental income. It considers mortgage principal, interest, taxes, insurance, and HOA fees, if applicable. Lenders utilize DSCR to gauge the loan amount that can be covered by the property’s income. However, DSCR calculations exclude expenses like management, maintenance, utilities, vacancy rate, or repairs.
The calculations to determine DSCR can be confusing for a commercial property, but the gist is that if a property has a long history of being an income-producing asset, the investment is more likely to be safe. Since the loan is protected by the asset, the terms for a DSCR loan are more flexible than a conventional mortgage.
Bank statement loans allow gig workers, contractors, and the self-employed the opportunity to qualify for a mortgage without using W-2s or tax return information. Lenders rely on bank statements in order to determine your ability to repay the loan.
Bank statements can give underwriters and lenders a better view of your average monthly income, as it might fluctuate compared to someone with a W-2 job. Additionally, since many business owners take the maximum amount of tax deductions available for their business, bank statements often give lenders a clearer idea of how much disposable income a business owner actually has.
P&L
P&L loans are very similar to bank statement loans. Instead of relying on bank statements, however, lenders rely on profit and loss statements from your business. Profit and loss statements outline revenues, costs, and expenses incurred during a specific period of time. They’re usually (but not always) prepared by a professional.
Many small business owners already have accountants who can prepare this information, which makes it much easier for the self-employed to come up with a verifiable income stream.
Asset Depletion
An asset depletion mortgage creates an annuity using your existing assets, under the assumption that you’ll sell off those assets over time in order to pay for the home. Typically, asset depletion loans utilize liquid assets, which are easily sold off. These might include certificates of deposit, stocks, bonds, bank accounts, retirement accounts, and more.
By including these assets as theoretical cash flow, borrowers may be able to enter into the real estate market and unlock the benefits of homeownership.
For example, if you’re self-employed and don’t have enough verifiable income to qualify for a home purchase but you do have $1.5 million in net assets, lenders can divide that $1.5 million in net assets by 360 (the total number of payments that you’d need to make to own a home, over a 30-year mortgage) in order to create a verifiable income stream, to show that a borrower can make payments of up to $4,166.67 by offloading these assets.
Interest-Only
Interest-only loans, or IO loans, give you the freedom to pay off your mortgage as you see fit. Great for W2’s with large bonuses or commissioned borrowers where they can pay down principal. Great for high-net-worth borrowers who want the flexibility to pursue other investments or create dry powder from liquid assets.
Foreign national loans are a great opportunity for those without US citizenship to become involved in real estate investing. According to US census data, there are over 46 million people residing in the United States without citizenship. These people are essentially barred from the conventional lending process, since they don’t have social security numbers or credit scores.
Construction Loans
Construction loans aren’t necessarily non-QM, but there are non-QM construction loan options, like the ones we offer here at Defy.
A construction loan is a specific type of loan designed to finance the construction of a new building or property. Unlike a traditional mortgage, where you receive the total loan amount upfront and repay it over time, a construction loan provides funds in stages or draws as the construction progresses.
Existing home inventory is at record lows, which might prohibit many buyers from finding a property in their area that provides the level of comfort and safety they need to grow a family. Warren Buffett recently invested over $800 million in new homebuilders, since demand for new homes is high and the supply is low, indicating that new homes may be a decent investment in today’s market.
Fix-and-Flip Loans
Alternatively, fix-and-flip loans take existing homes that have some significant deferred maintenance and fix those homes so that they can either be sold for a profit, turned into income-producing rental properties, or lived in by the flipper.
Fix and flip loans are typically short-term bridge financing for only a few months before the investor either sells the property or refinances it into a long-term option.
The market dynamics that make flipping a viable option are the same that make new construction a viable option. Since there’s a large demand for safe, fixed-up homes, the market tends to reward investors for providing this supply.
The Benefits of Non-QM Loans
Non-QM loans provide more flexibility and options for borrowers who may not qualify for a traditional mortgage. Specifically, non-QM loans feature:
- A broader range of loan programs tailored to the unique needs of borrowers in special circumstances. We will explore the different non-QM loan types later on.
- Less stringent credit standards since these loans are intended for those who may fall outside mainstream underwriting boxes.
- More flexible verification of income using alternative documents like bank statements, asset-based calculations, or rental income in lieu of tax returns.
- The ability to validate incomes from non-traditional employment scenarios. This expanded validation process makes it more feasible for self-employed, part-time, or gig economy workers to meet qualification thresholds.
Conclusion: Top 15 Non-QM Mortgage Lenders, Explained
A non-QM loan is specifically tailored for the people who aren’t typically served by the conventional lending process: the self-employed, gig workers, foreign nationals, and more. These loans exist outside of the box of conventional mortgages, and they can be a great option if you’re having trouble securing traditional financing or loan approval from a large bank.
These companies aim to open the door to wealth-building opportunities associated with homeownership for those with unique circumstances. We hope that this list gave you an idea of some of the best non-QM mortgage lenders to help you determine which lender is the best fit for your situation.
