Non-QM loans are mortgage loans for creditworthy borrowers who don’t meet the narrow documentation requirements of conventional loans. They offer adaptability in income verification and underwriting requirements, making them suitable for those with unique income situations, like self-employed individuals or property investors. These loans are playing a vital role in today’s mortgage market because they are filling a very real need among a large swath of individuals seeking to buy homes.
The non-QM market only came into being over the last decade, as regulators defined a framework for how to prudently underwrite loans in a way that would not stifle innovation. This recency has made them less familiar and, therefore, less ubiquitous.
However, that initial obscurity is considered outdated today as non-QM loans have evolved and gained broad market acceptance. They are now recognized as a viable option for borrowers who may not fit the conventional mold, such as self-employed individuals, foreign nationals, those with non-traditional income streams, or those with significant assets but who may not qualify under conventional guidelines.
Not only is there an increasing number of lenders offering these products, but non-QM loans have become essential to a competitive mortgage strategy. Lenders who ignore this crucial sector of the market are at risk of falling behind.
The Market Trends Driving Non-QM Adoption
There are several trends in today’s marketplace that are behind non-QM’s surge in popularity among lenders:
- Self-Employed and Gig Workers are on the Rise: With more than 72 million Americans earning income independently, traditional income verification simply doesn’t cut it anymore. According to MBO Partners, 16.7% of the workforce is full time independent, which grew a healthy 6.5% year over year in 2024. Non-QM products such as bank statement and 1099 loans offer the flexibility these borrowers need.
- Property Investors are Fueling Demand: Investor activity remains strong, which resulted in a 52% increase in DSCR loan volume year-over-year in 2024. The American Association of Private Lenders underscores this surge as investors seek business-purpose loans with fewer income hurdles.
- Borrowers Expect More: Today’s consumers want personalized solutions—and they’re willing to switch lenders to get them. A study by MX Technologies found that 54% of U.S. consumers want financial providers to use their data to deliver tailored experiences, yet only 44% of banks are meeting those expectations. Non-QM lenders are stepping up with tech-driven tools and flexible underwriting.
- Non-QM Market Share is Climbing: From less than 3% in 2020 to 5% in 2024, non-QM originations are on the rise. At Verus, we are projecting a 30% growth in non-QM production volumes in 2025, and intend to purchase $10 billion in non-QM assets – further solidifying non-QM’s position as a mainstream solution, not a niche.
Capital Markets are Accelerating Non-QM Growth
The healthy growth in non-QM lending is driven by more than just borrower demand – it is being also supported by Wall Street’s increasing appetite for alternative mortgage assets. Capital markets are playing a pivotal role in legitimizing and scaling non-QM lending, transforming it from a niche product into a mainstream financing solution.
- Securitization is Booming: Non-QM securitization volume hit record highs last year and is projected to surpass those levels this year. Investor and bank statement loans continue to dominate non-QM issuance, and there are expectations for robust volume that is driven by demand for scalable, asset-based finance.
- Committed Capital: Institutional investors are backing the non-QM sector because of its strong risk-adjusted returns and predictable performance. Unlike the subprime lending of the past, today’s non-QM borrowers have high credit scores (average FICO ~730+) and solid equity positions which make non-QM bonds attractive to investors searching for yield without significant risk.
- Liquidity Is Broadening Access: The rising capital flow into non-QM securitizations is providing lenders with more liquidity to originate loans. As warehouse lines and secondary market executions stabilize, lenders can offer more flexible products (such as DSCR, bank statement, and asset depletion loans) to a broader range of borrowers.
How to Seamlessly Integrate Non-QM into Your Loan Lineup
Incorporating non-QM loan solutions into your product offering isn’t just a smart move, it is a strategic necessity in today’s dynamic marketplace. Here are the steps for integrating them efficiently:
- Begin with the highest-impact products – DSCR and Bank Statement offerings address common pain points – whether its liquid assets, qualifying based on rental income or alternative income documentation, offering instant value to underserved borrowers.
- Match your products to underserved borrower profiles – think self-employed professionals, retirees, foreign nationals, and investors. This will help generate new business and improve conversion rates.
- Train your team to identify non-QM opportunities – Educate your loan officers to spot non-QM scenarios in their pipelines. For example, a self-employed borrower denied a mortgage for lack of a W-2 could still qualify with a bank statement program.
- Partner with trusted wholesale or correspondent providers – Limit your operational risk by working with knowledgeable and experienced non-QM investors who offer flexible underwriting, dedicated support, and tech-savvy platforms.
- Market non-QM responsibly and compliantly – Avoid jargon and focus on borrower benefits such as flexibility, speed, and access. Develop targeted campaigns that incorporate email, social media, and webinars, and ensure your messaging aligns with all regulations.
The Risks of Sitting Out
Lenders who choose to sidestep non-QM solutions believing they are too difficult to support operationally are, in fact, missing a tremendous revenue and margin opportunity. These loans have not only proven their viability and legitimacy in the marketplace, but they have also demonstrated their value to lenders and borrowers alike.
In addition, lenders who do not participate in the non-QM sector run the risk of losing their referral partners to more versatile competitors who have embraced the non-QM model.
In the continual quest to build long-term customer relationships, lenders who do not offer non-QM loans are putting themselves at a strategic disadvantage. Borrowers’ situations change over time, and as more borrowers become self-employed their needs may begin to change. Having non-QM loans in your lending arsenal puts you in a much better position to serve your customers’ evolving financial needs over time.
Conclusion: Non-QM is a Strategic Imperative
Non-QM lending isn’t just gaining ground, it’s helping reshape how lenders think about access, flexibility, and risk management. From self-employed borrowers to real estate investors, today’s market calls for solutions that go beyond conventional guidelines. And with increasing support from capital markets, non-QM is now part of a larger movement toward inclusivity and modernizing mortgage finance.
As the mortgage landscape continues to evolve, it’s worth taking a fresh look at your current loan offerings. Consider where non-QM might fill gaps, empower your loan officers with the proper training, and enter into partnerships that make adoption smooth and scalable. The lenders who embrace non-QM now will be better prepared for whatever comes next.