Are declined conventional/agency loan applicants eligible for a non-qm loan?

While the lower interest rates have been a surprise for mortgage lenders, there are still borrowers who do not qualify for conventional loans through the agencies (Fannie Mae/Freddie Mac). But are these prospective borrowers just out of luck or is there a responsible alternative for these creditworthy applicants? Let’s examine two common situations:

  • Self-Employed – In today’s economy, well over 15 million individuals are self-employed, and that number is expected to continue to rise. Self-employed borrowers often have some of the largest challenges with qualifying for conventional loans. Their income may not be regular, finances more complicated, and documentation a challenge. But careful analysis of the borrower could reveal that a non-QM product that takes a more holistic look at the credit profile may be a viable alternative. According to an article (no longer posted) in HousingWire, two-thirds of non-QM borrowers used some level of alternative or limited documentation, and about one-quarter were denied a prime-rate loan due to a prior credit event.
  • Borrowers Looking for Additional Financing Options – For many borrowers, the traditional, 30-year fixed-rate loan is the safe, predictable product they are looking for. However, many other families are interested in more options, and that’s when non-QM loan products, like an interest-only, cash-out refinance might make sense. A possible scenario includes a borrower who plans to move out within a year or two.

Lenders with borrowers who might be a good fit for these alternative products and options need an investor partner that is experienced, specialized in the non-QM space, with the technology and trained staff to execute and deliver. The non-QM market has exploded over the past few years (as much as $40 billion projected in 2019), and experts estimate that as much as $200 billion annually in unmet demand exists. Verus offers a growing selection of loan products for borrowers who don’t fit the traditional credit box, along with the experience and commitment to help correspondent lenders succeed.

Why Non-QM Lending Is Booming—and Where It’s Headed Next

Explore why non-QM lending is booming in 2025, driven by rising borrower demand, strong market resilience, and strategic growth opportunities with Verus Mortgage Capital.

Verus Mortgage Capital Maintains Leadership as a Top Non-Agency RMBS Issuer in 2024

Washington, D.C. – March 10, 2025 – Verus Mortgage Capital (VMC), a correspondent investor specializing in residential non-QM and investor rental programs, reaffirmed its position as a leading issuer of non-agency mortgage-backed securities last year. VMC specializes in expanded credit/non-QM and investor rental loan programs and financed 12 deals totaling more than $6.5 billion. SinceRead More

Lenders: Approve Self-Employed Borrowers Without Standard Docs

Since the advent of the home lending process as we know it today, self-employed borrowers have historically faced significant obstacles when seeking mortgage approvals. These individuals now represent nearly 10% of the U.S. workforce as of 2024 and contribute substantially to the nation’s overall economy. Yet their unique financial situations often place them outside theRead More

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