A non-qualified mortgage (non-QM) is a home loan designed to help homebuyers who can’t meet the strict criteria of a qualifying mortgage. For example, if you are self-employed or don’t have all the necessary documentation to qualify for a traditional full documentation mortgage, you will need to look at non-qualified mortgages.

Banks and credit unions typically provide funding for qualified mortgages while hard money lenders provide funding for non-Qualified mortgages. Because this is a riskier loan to a lender, you’ll experience higher interest rates and larger down payments with non-QM loans.

A significant difference between a QM loan and a non-QM loan is that a non-QM loan uses alternative methods of income verification. In addition, non-QM loans are not insured, guaranteed, or backed by FHA, VA, Fannie Mae, or Freddie Mac like qualified mortgages.