If you are a self-employed borrower or a real estate investor you may find it hard to show income in the way a traditional mortgage lender wants. Traditional lenders typically require for first and especially second mortgages for borrowers to provide W-2s, pay stubs, and extensive tax returns. If you write off expenses or have multiple income streams it may be hard to prove your true income.
Non-QM second mortgage products solve this problem. They let you borrow against your home’s equity without disturbing your first mortgage. They do not require extensive employment documents and there are many options available to match your financial situation.
Non-QM products allow you to borrow from $200,000 up to $500,000 against your home’s equity. That means you can fund a home improvement, consolidate high-interest debt, or buy another rental property without touching your first mortgage’s low rate.
If you are a self-employed borrower or a real estate investor a non-QM second mortgage may be a strong financing option for you.
What Are Non-QM Second Mortgage Loans?
Non-QM (Non-Qualified Mortgage) products do not follow conforming guidelines. Instead of W-2s, pay stubs, or tax returns lenders approve you based on alternative income criteria.
Key Features:
Non-QM products do not require traditional income documents for self-employed borrowers.
Loan products use 12–24 months of bank statements or Profit and Loss (P and L) statement for the last 12 or 24 months instead of tax returns.
Some products use only rental income to approve you, not your employment income.
Non-QM products allow you to borrow against your home or investment property without disturbing your first mortgage.
Benefits:
Non-QM products let you leverage your home’s equity while retaining your low mortgage rate.
This lets you fund other financial goals without needing to refinance into a higher rate first mortgage.
Non-QM products match the financial profiles of many self-employed borrowers and real estate investors who do not show all their income on tax returns.
Why Choose a DSCR Second Mortgage?
A Debt Service Coverage Ratio (DSCR) second mortgage lets you borrow against your home’s equity based on rental income instead of employment income. The lender divides your rental income by total mortgage payment. If your rental income covers the payments you may be eligible.
Advantages for Investors:
There is no need for pay stubs or extensive employment and personal income documents.
Your rental income is what matters most for approval.
Your first mortgage stays in place with its low interest rate.
It lets you fund repairs, pay off high-cost debt, or buy additional rental properties.
Use Cases:
Some borrowers use DSCR seconds to fund renovations and buy another rental property.
Others consolidate credit card debt into a lower-cost mortgage.
This lets you grow your portfolio without touching your first mortgage.
Profit and Loss Loans for Self-Employed Borrowers
What is a Profit and Loss (P and L) Second Mortgage?
For many small business owners and 1099 workers, a Profit and Loss (P and L) statement can accurately show their income. A Profit and Loss second mortgage lets you use your P and L prepared by a CPA, CTEC or enrolled Agent instead of traditional pay stubs or tax returns.
Advantages:
Provides an accurate view of income for businesses with many write-offs.
Relieves you from needing extensive bank statements or years of tax returns.
Helps match your true financial profile to your borrowing ability.
Who Benefit From P & L Loans:
Small business owners
Consultants
Independent contractors
Doctors, lawyers, and other high-earning professionals
Borrowers who maximize their expense deductions to lower their net income for tax purposes
Who Benefits from Non-QM Second Mortgages?
Non-QM products match a range of financial profiles. Here are the most likely borrowers to benefit:
1. Self-Employed Borrowers:
If you deduct expenses for tax purposes or have irregular income you may find it hard to show consistent income through tax returns. Profit and Loss or bank statement lending products may be the ideal option for your financial profile.
2. Real Estate Investors:
Your rental income will be the key consideration in securing a DSCR second mortgage. Your rental property can benefit without you needing to provide extensive employment documents.
3. Credit-Sensitive Borrowers:
Non-QM products often allow for lower credit scores below 680 and past credit events. The guidelines are more flexible.
How to Qualify for a Non-QM Second Mortgage
Non-QM products have less restrictive criteria but there are a few things you should be ready to provide.
Credit Score:
Most products require a minimum score of 660 or above. Scores of 720 and above get you best rates available.
Equity:
Non-QM products typically require you to retain 20–30% equity in your home after the loan funds.
This lets lenders know you have skin in the game and are unlikely to default.
DSCR or Profit and Loss:
For DSCR, your rental income should be at or above total mortgage payments.
For Profit and Loss, your licensed tax preparer or CPA should prepare a 1–2 year P and L that shows strong net income.
Bank Statements:
For bank statement products, you typically need 12–24 months of deposits and if necessary, a CPA or licensed tax preparer letter to declare your business expenses.
Rental or Lease Documents:
For DSCR, you may need a current rental agreement or rental schedule. If the property is vacant, then we’ll use the market rents from the appraisal report.
Process and Closing Timeline
Non-QM products typically close faster than conforming mortgage products.
1. Apply online.
2. Provide required documents promptly.
3. The lender reviews and underwrites the application in a few days.
4. An appraisal is performed to determine your home’s current market value.
Note: for loan amounts below $250,000 an automated value report may be an option
5. The title search and closing disclosure are prepared.
6. Your mortgage typically funds within 30–60 days of submission.
If you’d like to find out whether you’re eligible please connect with me today.
Conventional Second vs Non-QM Second Mortgage
| Conventional Second | Non-QM Second | |
|---|---|---|
| Interest Rate | 7.00%–9.50% | 9.00%–11% or higher |
| Credit Score | 720+ | 620 or higher |
| Income | W-2, pay stubs, 1040s | Profit and Loss, bank statements, rental income |
| Approval Criteria | Strict, documented income | Flexible, alternative income |
| Borrower Profile | Traditional borrowers with strong credit | Self-employed, 1099 workers, real estate investors |
| Best For | Lower rate, strong financials | Access to equity with less restrictive criteria |
This table highlights key differences between Conventional Second Mortgages and Non-QM Second Mortgages. Non-QM products typically carry higher rates and more flexible criteria, making them a strong option for borrowers who do not meet traditional guidelines but have substantial equity or income from non-wage sources.
Click to ApplyWhy Act Now?
Non-QM products are growing in popularity. Market reports show nearly 30% of non-agency mortgage transactions in 2025 will be non-QM.
If you wait borrowing conditions may become more restrictive and you may miss a key opportunity. Rising mortgage rates and tighter guidelines may soon limit your options.
Non-QM products let you borrow against your home while retaining your first mortgage’s low rate.
Real-World Example Transaction
Here is a real-world example. Michael Peterson is a self-employed contractor in Denver. His accountant prepared a Profit and Loss for 2023 showing a net income of 220,000. His tax returns reflect much less due to depreciation and expenses. Michael wanted $250,000 to consolidate high-cost debt and fund a small rental property.
He kept his first mortgage at 3.75% and applied for a Profit and Loss Second mortgage. His lender reviewed his accountant-prepared Profit and Loss, verified his bank deposits, and approved him in less than 30 days.
William Cook, a Senior Loan Officer at Omni Fund Inc., explained Michael’s approval this way.
He said “Non-QM products lets us match a borrower’s true financial profile to a mortgage. Michael is a perfect example. His Profit and Loss shows strong income from his business even though his tax returns reflect numerous expenses. Our team was able to approve him quickly and without refinancing his first mortgage.”
This highlights the expertise and credibility a specialized mortgage professional brings to a non-QM transaction.
Conclusion
Non-QM second mortgage products match borrowers who do not fit into conforming guidelines. Whether you are a self-employed borrower, a real estate investor, or someone who deducts many expenses on your tax return, there are products designed to help you borrow against your home’s equity.
Non-QM products let you fund a range of goals. That may be purchasing a rental, renovating a home, or consolidating high-cost debt. Importantly, you do not need to impact your first mortgage. That lets you retain a low rate while accessing the cash you need.
Find out if you’re eligible please apply online or schedule a consultation today.
The minimum loan amount: $200,000 and maximum loan is $500,000.
I specialize in non-QM products and can match you with a mortgage that fits your goals.