Non-QM Glossary

A mortgage that does not meet the strict underwriting standards established for Qualified Mortgages under CFPB regulations. Non-QM loans allow alternative income documentation, flexible underwriting, and expanded borrower eligibility.

A mortgage that meets CFPB standards for borrower ability-to-repay and other regulatory requirements. QM loans typically follow traditional agency or conventional underwriting guidelines.

A ratio used primarily for investor loans that measures a property's ability to generate enough income to cover its debt obligations. Formula: Gross Rental Income ÷ PITIA A DSCR above 1.00 indicates the property generates enough income to cover housing expenses.

The percentage of the property's value being financed through the loan. Formula: Loan Amount ÷ Property Value Lower LTVs generally result in better pricing and lower risk.

The total of all loans secured by the property divided by the property's value, including first and second mortgages.

The projected market value of a property after renovations or improvements are completed. Commonly used in bridge, rehab, and fix-and-flip lending.

Principal, Interest, Taxes, Insurance, and Association Dues. Represents the borrower's full monthly housing payment obligation.

A variation of PITIA that may exclude HOA dues when no association applies.

A loan structure where the borrower pays only interest for an initial period, resulting in lower monthly payments before principal repayment begins.

The schedule by which a loan balance is gradually paid down over time through principal and interest payments.

A large lump-sum payment due at the end of a loan term when the loan has not fully amortized.

Liquid or near-liquid assets remaining after closing, measured in months of PITIA. Used to demonstrate borrower financial strength and post-close liquidity.

A borrower's monthly debt obligations divided by gross monthly income. Frequently used in full-doc and bank statement Non-QM programs.

A federal requirement mandating lenders make a reasonable, good-faith determination that a borrower can repay the loan.

Positive underwriting attributes that help offset risk, such as high reserves, low LTV, strong credit, or significant cash flow.

A refinance where the borrower receives proceeds above the amount needed to pay off existing liens.

A refinance intended to improve loan terms or rate without significant equity extraction.

A commercial/investor lending metric measuring NOI divided by loan amount. Used less frequently in residential Non-QM but common in larger investor transactions.

The length of time a borrower has owned a property or held funds/assets. Can affect eligibility for refinance, cash-out, or delayed financing.

Allows a borrower who purchased a property with cash to refinance shortly after purchase and recapture funds, subject to guidelines.

A Non-QM loan program using personal or business bank statements to verify income instead of tax returns.

A loan program allowing self-employed or contract borrowers to qualify using 1099 income.

An income calculation method where eligible liquid assets are converted into qualifying income for underwriting purposes.

A program using employment verification in lieu of traditional income documentation, typically for certain wage earners.

A borrower's credit score used by lenders to assess creditworthiness.

Credit accounts appearing on a borrower's credit report, used to evaluate credit history depth and payment behavior.

Negative credit events such as late payments, collections, bankruptcies, foreclosures, or charge-offs.

A fee charged if the borrower pays off the loan within a specified early period. Common on investor Non-QM products.

An investor loan qualified primarily on property cash flow rather than borrower personal income.

Short-term financing used until permanent financing or sale occurs.

Short-term rehab financing for investors purchasing and renovating properties for resale.

Financing used to build a new property from raw land through completion.