Compare
Non-QM vs Conventional Loan
Conventional wins on rate when your file fits. Non-QM wins on access when it doesn’t. Here’s the honest line between the two.
The short answer
Choose Non-QM if
- You're self-employed, 1099, or write off heavily on taxes
- You own 4+ financed investment properties already
- You're a foreign national, visa holder, or non-resident
- You want to vest title in an LLC
- You need to close in under 30 days
- Your DTI exceeds conventional limits despite strong assets / income
- You're qualifying on rental income rather than personal income
- You need a loan above the conforming limit
Choose Conventional if
- You're a W-2 employee with steady, documented income
- Your tax returns and DTI comfortably support the loan
- You're buying your first or second property and want lowest rate
- You can vest in your personal name without LLC concerns
- You're putting <20% down and need PMI-eligible financing
- The loan amount is at or below the conforming limit
Side-by-side: Non-QM vs Conventional Loan
| Feature | Non-QM Loan | Conventional Loan |
|---|---|---|
| Income documentation | DSCR (none), bank statements, P&L, 1099, asset utilization | 2 years tax returns + W-2s + recent pay stubs (full doc only) |
| Who underwrites it | Non-QM aggregators against published matrices | Fannie Mae / Freddie Mac via DU/LP automated underwriting |
| Maximum LTV (primary) | Up to 90% (Prime Time) | Up to 95-97% with PMI |
| Maximum LTV (investment) | Up to 80% (DSCR) | Up to 75-80% (lower on 2nd+ investment) |
| Minimum credit score | 640 (DSCR) / 620 (Prime Time) | 620 (higher for investment) |
| Property count limit | Unlimited (DSCR) | 10 financed properties total per borrower |
| DTI limit | Not measured (DSCR) / up to 55% (Prime Time) | Typically capped at 43-50% |
| LLC vesting | Allowed nationwide (DSCR) | Not allowed — must vest in personal name |
| Foreign national borrowers | Eligible (FN DSCR program) | Not available |
| Loan amount range | $100K - $4M (varies by program) | Up to conforming limit ($766,550 - $1,149,825 in 2026) |
| Closing timeline | 15-30 days | 30-45 days |
| Rate (typical, 2026) | Premium over conventional (flexibility trade-off) | Lowest available with strong full-doc file |
FAQ
A non-QM (non-Qualified Mortgage) loan is any mortgage that doesn't meet the strict Qualified Mortgage rules set by the CFPB — usually because it uses alternative income documentation (DSCR, bank statements, P&L, 1099, asset utilization) instead of tax returns and W-2s. Non-QM loans are fully legal and regulated; they're just underwritten on different criteria.
Not worse — different. Conventional loans offer the lowest available rate when you qualify with full income docs. Non-QM loans serve borrowers who can't or shouldn't qualify on tax returns — and offer features (LLC vesting, unlimited properties, foreign-national programs, no DTI cap) conventional doesn't. Pick the product that fits your file.
Pricing depends on the specific non-QM program, FICO, LTV, and occupancy. Bank statement, P&L, and 1099 paths typically price modestly above conventional. DSCR loans (investment-only) carry a higher premium because they skip income docs entirely. We always quote both side-by-side when both paths are open to you.
Yes — and many borrowers do. If your tax-return income improves and falls within conventional DTI limits, you can refinance a non-QM mortgage into a conventional loan for a lower rate. There's no prepayment trap that prevents it (subject to standard PPP terms on the original loan).
TQL specializes in non-QM. For borrowers who qualify conventionally with the lowest rate available, we'll tell you straight and refer you to a conventional shop. We never sell a non-QM loan to someone conventional would serve cheaper — that's not how we keep customers for life.