Non-QM loans in California

When a non-QM loan makes sense

California has more self-employed people than any other state, and many of them earn well but show modest income on their tax returns after legitimate write-offs. Conventional underwriting reads that net figure and stops there. A non-QM loan can look at what actually comes into the business, which is often a very different picture.

Non-QM is also the answer for investors who want to qualify on rental income, buyers with substantial savings but little regular income, and borrowers rebuilding after a bankruptcy, foreclosure or short sale who do not want to wait out the conventional seasoning period.

Types of non-QM loans we arrange

• Bank statement loans. Income is calculated from 12 or 24 months of personal or business bank deposits instead of tax returns. Built for business owners and the self-employed.
• 1099 income loans. For independent contractors, agents and gig workers, qualifying on the gross 1099 income with an expense factor.
• Profit and loss loans. A CPA- or tax-preparer-prepared P&L statement documents the income, sometimes paired with a few months of bank statements.
• Asset depletion or asset qualifier loans. Savings, brokerage and retirement accounts are converted into a qualifying income, useful for retirees and early retirees.
• DSCR loans. Investment property loans that qualify on the property’s rent rather than your personal income.
• Recent credit event loans. Options one to two years after a bankruptcy, foreclosure or short sale.
• Non-QM jumbo loans. Larger loan amounts with alternative documentation, common in high-cost California markets.
• Foreign national loans. For buyers without U.S. credit or residency.

What documentation looks like

Non-QM loans are not “no documentation” loans. Every program verifies your ability to repay, with a credit report, an appraisal, proof of assets and reserves, and the income documentation that fits your program. The difference is that the documentation matches how you actually earn money. A business owner might provide 24 months of business bank statements and a business license. A retiree might provide brokerage statements. An investor might provide the lease and a rent schedule from the appraiser.

What to expect on rate and down payment

Pricing on non-QM loans is set by each lender and moves with credit score, down payment, loan size and documentation type. Expect rates somewhat above conventional, and down payments that usually start around 10% to 20%. Because the market is made up of many specialty lenders with different guidelines, shopping matters more here than with almost any other loan. That is where our option to broker helps: Alameda Mortgage is a direct lender, and when another lender’s rules fit your scenario better, Mike can send it there.

Planning the next step

Many clients use a non-QM loan to buy or refinance now, then move into a conventional loan in a year or two when their tax returns reflect their income. We look at that path with you up front, including any prepayment terms on the non-QM loan, so you are not locked into higher pricing longer than you need to be.

Which documentation type fits you

The right program usually follows from how your income shows up. If most of it lands in a business checking account, bank statements are the natural fit. If you receive 1099s from a handful of clients, a 1099 program is often simpler. If you have significant savings but little ongoing income, such as an early retiree or someone between ventures, an asset qualifier loan converts those balances into qualifying income. Investors buying rentals usually go straight to DSCR.

Choosing correctly matters, because the same borrower can qualify for very different loan amounts under different methods. Mike will often run two documentation types to see which gives you the stronger approval and the better price.

Non-QM in the California market

High prices mean many California non-QM loans are also jumbo-sized, and lenders adjust their down payment and reserve requirements as loan amounts rise. Condos, mixed-use buildings and properties held in an LLC are common here too, and each lender treats them differently. Working with a direct lender that can also broker gives you access to many of those lenders at once rather than one set of rules.