The Non-QM Glossary

1099 Only Loan

Qualifies independent contractors on 1099 income instead of W-2s and full tax returns.

Alternative Documentation

Any eligible income documentation other than W-2s and tax returns.

Asset Utilization

Qualifies a borrower using eligible assets instead of, or alongside, employment income.

Business Bank Statement Loan

Qualifies self-employed borrowers on business account deposits instead of tax returns.

Combined Loan-to-Value (CLTV)

All loans secured by a property, combined, as a percentage of its value.

Commingled Funds

Personal and business money moving through the same bank account.

Compensating Factor

A strength in the file that can help offset added risk elsewhere.

Property

Condotel

A condo project that operates with hotel-style services, like a front desk or rental program.

Debt Service Coverage Ratio (DSCR)

Rent divided by the property's monthly payment. The core ratio on investor loans.

Debt-to-Income Ratio (DTI)

Monthly debt payments divided by qualifying monthly income.

Structure

Delayed Financing

Buying with cash, then placing a mortgage on the property soon after closing.

Eligible Deposits

The bank statement deposits that can count toward a borrower's qualifying income.

Borrower

First-Time Investor

A borrower financing investment property with no track record as a landlord.

Borrower

Foreign National

A non-U.S. citizen living primarily abroad who wants to finance U.S. property.

Guideline Exception

A request to approve a loan that falls outside one or more program guidelines.

Housing History

A borrower's record of paying rent or a mortgage on time.

Borrower

ITIN Borrower

A borrower who uses an IRS-issued ITIN instead of a Social Security number.

Loan-to-Value (LTV)

The loan amount as a percentage of the property's value.

Market Rent

The rent a property could reasonably command in its local market.

Property

Mixed-Use Property

A property that combines residential and commercial space.

Mortgage Reserves

Funds a borrower still has after closing, usually measured in months of payments.

Non-QM Mortgage

A mortgage outside federal Qualified Mortgage rules that is still fully underwritten.

Property

Non-Warrantable Condo

A condo project that doesn't meet Fannie Mae or Freddie Mac project eligibility rules.

Personal Bank Statement Loan

Uses deposits into the borrower's personal account to document qualifying income.

P&L Only Loan

Qualifies self-employed borrowers using a profit and loss statement as the main income document.

Structure

Prepayment Penalty

A charge for paying off a loan early, most common on investor loans.

Structure

Second Mortgage

A loan secured by the property behind an existing first mortgage.

Short-Term Rental Income

Rent from short stays, like vacation rentals, used to qualify an investment property.

Written Verification of Employment (WVOE)

An employer-completed form verifying a borrower's job and, often, income.