Non-QM Mortgages in California: Programs, Requirements & How They Work

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Non-QM is a significant part of what I do — self-employed borrowers, investors, foreign nationals, recent credit events — and I have access to 40+ wholesale lenders, including many non-QM specialists. Call (800) 239-1103.

A non-QM (non-qualified mortgage) is a home loan that falls outside the federal “qualified mortgage” definition — usually because it uses alternative income documentation, an interest-only period, a term over 30 years, or other features agency loans don’t allow. Non-QM loans serve creditworthy borrowers whose income or situation doesn’t fit Fannie Mae, Freddie Mac, FHA or VA guidelines.

What “Non-QM” Actually Means

Under the CFPB’s ability-to-repay rule, every lender making a home loan must make a reasonable, good-faith determination that you can repay it. A qualified mortgage (QM) is a category of loan that gets legal protection for meeting that rule. A QM can’t have an interest-only period, negative amortization, a balloon payment (with limited exceptions) or a term over 30 years; points and fees are capped (generally 3% on larger loans); and it must meet pricing and underwriting standards. Loans eligible for purchase by Fannie Mae and Freddie Mac, and FHA, VA and USDA loans, generally qualify.

A non-QM loan is anything outside that definition. The old idea that QM means a hard 43% DTI cap is out of date — the CFPB replaced that test with a price-based standard in 2021. Today, most non-QM loans are non-QM because of how income is documented (bank statements, P&L, assets) or because of their structure (interest-only, 40-year terms).

Non-QM is not subprime. Owner-occupied non-QM loans must still meet the ability-to-repay rule, lenders verify income and assets (just differently), and many programs have strict credit, reserve and down-payment requirements. Federal rules also bar prepayment penalties on owner-occupied non-QM loans.

Non-QM Programs Available in California

Bank statement loans

Qualify on 12 or 24 months of personal or business bank deposits, with an expense factor applied, instead of tax returns. The workhorse program for self-employed borrowers whose returns show heavy write-offs. Bank statement loans →

P&L and 1099 programs

Qualify on a profit-and-loss statement (often CPA- or tax-preparer-prepared, sometimes with supporting bank statements) or on 1099 totals for independent contractors, typically after an expense factor. Self-employed mortgage options →

Asset depletion (asset utilization)

Turns eligible liquid assets into qualifying income. Lenders divide the eligible balance by a set number of months — anywhere from about 60 to 360 depending on the program — and apply haircuts to retirement and investment accounts. Asset depletion mortgages →

DSCR loans for investors

Business-purpose loans on investment property that qualify on the property’s rent compared with its payment (PITIA), not your personal income. DSCR loans → and DSCR for short-term rentals →

Interest-only and 40-year loans

Lower payments for high-cost markets and cash-flow-focused buyers. Owner-occupied loans are still qualified on the fully amortizing payment. 40-year and interest-only mortgages →

Recent credit events

Programs that allow shorter waiting periods after bankruptcy, foreclosure or short sale than agency guidelines, usually with larger down payments. Mortgage after foreclosure or bankruptcy →

Foreign national and ITIN loans

For buyers without U.S. credit or a Social Security number. Foreign national mortgages → and ITIN mortgages →

Jumbo non-QM

Many of the programs above are available above the 2026 conforming limit ($832,750 in most of California, up to $1,249,125 in high-cost counties). Jumbo loans →

Not the same thing: hard money and bridge loans are short-term, asset-based loans (typically 6–24 months) for investors and time-sensitive situations — a different product from a long-term non-QM mortgage.

Who Uses Non-QM Loans?

• Self-employed business owners whose taxable income is far below their cash flow
• Real estate investors qualifying on rent, buying in an LLC, or holding many financed properties
• High-net-worth borrowers and retirees with large assets and modest income
• Tech and finance professionals with complex compensation
• Foreign nationals and ITIN borrowers
• Borrowers rebuilding after a credit event
• High-DTI borrowers whose income is solid but doesn’t fit agency ratios — see high-DTI mortgages
• Buyers of non-warrantable condos and unusual properties — see non-warrantable condos

Rates, Down Payments and Trade-Offs

Non-QM loans cost more than agency loans because lenders can’t sell them to Fannie Mae or Freddie Mac. The premium depends on the program, credit score, loan-to-value, documentation type, property and loan size, and it moves with the market — so I price each scenario live rather than quote a range. Down payments are generally larger than agency minimums: a well-qualified bank statement borrower may put down around 10–20%, while DSCR, asset depletion, foreign national and recent-credit-event programs usually require more. Most non-QM programs don’t use mortgage insurance; the risk is priced into the rate. Investment-property non-QM loans may carry prepayment penalties; owner-occupied non-QM loans can’t.

Refinancing Out of Non-QM Later

For many borrowers, non-QM is a bridge, not a destination. Buy now, then refinance into a conventional loan once you qualify — for example, after two years of tax returns that support the income, or once the waiting period after a credit event has passed and you’ve rebuilt credit. I’ll map out those milestones at the start so the non-QM loan is part of a plan, and I’ll check whether a refinance makes sense once you get there.

Why Use a Broker for Non-QM?

Non-QM isn’t one program — it’s dozens of programs from different lenders, each with its own income calculation, LTV limits, reserve requirements, credit tiers and pricing. The same bank-statement borrower can qualify for meaningfully different loan amounts and rates depending on how a lender counts deposits. A retail lender may have one or two non-QM products, or none. With access to 40+ wholesale lenders, I can compare several non-QM programs for your exact scenario and show you the trade-offs side by side.

Frequently Asked Questions

What is a non-QM loan?

A non-QM (non-qualified mortgage) is a home loan outside the CFPB’s qualified-mortgage definition — for example, one using bank statement, P&L or asset-based income, an interest-only period, or a term over 30 years. Lenders still have to verify that you can repay an owner-occupied non-QM loan.

Is a non-QM loan the same as a subprime loan?

No. Non-QM loans are underwritten with verified income and assets — just documented differently — and many programs require strong credit, reserves and meaningful down payments. They cost more than agency loans because they can’t be sold to Fannie Mae or Freddie Mac.

What credit score do I need for a non-QM loan?

It varies by lender and program. Many non-QM programs start around the low 600s, some go lower with larger down payments, and pricing improves significantly at higher score tiers. A broker can compare several lenders’ minimums for your scenario.

How much down payment does a non-QM loan require?

Usually more than agency loans. Strong bank statement borrowers may put down about 10–20%, while DSCR, asset depletion, foreign national and recent-credit-event programs typically require more. Most non-QM loans don’t use mortgage insurance.

Can I refinance out of a non-QM loan later?

Yes, and many borrowers plan for it. Once you qualify for a conventional loan — for example, with two years of tax returns that support your income or after the waiting period following a credit event — you can refinance. Owner-occupied non-QM loans can’t carry prepayment penalties.

How is non-QM different from hard money?

Non-QM loans are long-term mortgages, typically 30 or 40 years. Hard money loans are short-term (often 6–24 months), asset-based loans for fix-and-flip, bridge or time-sensitive purchases.

Related Resources

• Mortgage Broker for Complex Borrowers
• Bank Statement Loans
• Asset Depletion Mortgages
• DSCR Loans
• Self-Employed Mortgages
• Mortgage Application Denied?
• Physician Loans