Overview
Self-employed borrowers often have a mismatch between actual cash flow and tax-return income. You legitimately write off business expenses, depreciate equipment, contribute to retirement accounts — and end up with adjusted gross income that doesn't reflect what you really earn. Conventional underwriting penalizes you for those legal deductions. Non-QM products solve the mismatch.
Bank statement loans qualify you based on 12 or 24 months of business or personal bank statement deposits, using an expense ratio (typically 50% for personal accounts). No tax returns required. P&L-only loans use your CPA-prepared profit & loss statement. Asset-based loans use your liquid net worth divided by months for qualifying income — useful for retired or transitioning self-employed borrowers.
DSCR loans go further, qualifying purely on the rental property's cash flow rather than your personal income — ideal for investors. Most Non-QM products require 10-25% down, 6-12 months of reserves, and credit scores of 620-680+. Rates run 0.5-1.5% above comparable conventional pricing. Many borrowers refinance to conventional after 2 years of documented income on the new business.
Recommended loan programs
Frequently asked questions
Why can't I qualify with my tax returns?+
Conventional underwriting uses your net income from Schedule C or your distributions from a K-1, plus some add-backs (depreciation, depletion, business use of home). For many self-employed borrowers, this number is substantially lower than what their bank deposits show. The bank statement loan solves this by qualifying on deposits instead.
How long must I be self-employed to qualify?+
Most Non-QM programs require 2 years of self-employment in the same business. Some lenders accept 1 year with strong offsetting factors like a large down payment, high credit, or significant reserves. CPA or business license confirms longevity.
Are Non-QM rates much higher than conventional?+
Typically 0.5%-1.5% higher than comparable conventional pricing, depending on credit score, LTV, and product. The premium reflects higher risk and smaller secondary market. Many borrowers plan to refinance to conventional after 2 years on the new business or property.
Can I close in an LLC?+
Yes on DSCR loans — closing in an LLC for asset protection is standard. On personal Non-QM and bank statement loans, you typically close in your individual name, then can deed into an LLC after closing (though check with the lender; some prohibit this for a year).