You may run your own business, work as a 1099 contractor, or have built a career outside the nine-to-five world. You have probably heard some version of this: “The bank says you don’t qualify”. What often goes unsaid is that standard underwriting may not fully capture your financial situation. NonQM loans provide alternative qualification options for self-employed professionals, entrepreneurs, or high-asset retirees. Understanding what these products are and who they are built for could completely change your path to homeownership.
NonQM loans are not high-risk products reserved for problem borrowers. They offer alternative qualification options for self-employed professionals, 1099 earners, investors, and retirees. Some programs use bank statements, asset-based income, or other documentation when standard income calculations do not fit the borrower’s financial situation. Qualification requirements vary by program, including credit, down payment, and income documentation.
What NonQM Means for Self-Employed Borrowers
The term “nonQM” carries a reputation it does not deserve. After the 2008 financial crisis, the Dodd-Frank Act established the Ability-to-Repay requirement and the Qualified Mortgage framework. NonQM simply means the loan falls outside that specific framework, often because the underwriting or income documentation works differently, not because the borrower is risky.
NonQM is not a code word for low credit scores or problem borrowers. This matters to Indiana’s growing population of self-employed professionals, business owners, and 1099 contractors. Many earn high income, but their tax returns may show substantial deductions that reduce their qualifying income under conventional underwriting.
NonQM Products for Different Income Profiles
Tevis has built a nonQM practice that now makes up a growing share of the team’s volume. NonQM represented less than 5% of closed loans in 2025, and the team expects 25 to 30% of 2026 business to close in nonQM products. That shift reflects demand from borrowers whose financial profiles can be difficult to document under traditional guidelines.
The team’s NonQM offerings cover several alternative ways to document income and qualify for financing:
"NonQM doesn't necessarily mean high credit or low credit scores. It doesn't mean bad loans. It typically means there's going to be alternative income documentation. What we're trying to do with nonQM is give individuals who are self-employed an option to still have a path to buy a house using non-traditional products."
— Tevis Durbin, Producing Branch Manager (NMLS #424899)
Bank Statement Loans
Bank statement programs use eligible deposits to calculate qualifying income instead of relying solely on tax returns. A 24-month look-back provides more income history and may offer better pricing, while a 12-month option is also available. An expense ratio, based on business type and other factors, helps determine net qualifying income.
A REALTOR® with limited overhead might carry a 30% expense factor, while an engineering firm with 10 employees and warehouse costs might run 80%. The calculation is specific to each borrower’s business and financial profile.
1099 Loans
Conventional underwriting can reduce qualifying income for 1099 earners after allowable business expenses are considered. A NonQM 1099 program may use gross 1099 income under its own qualification method. For high-earning contractors and commission-based professionals, that difference can improve their ability to qualify.
Profit and Loss Loans
Some NonQM programs allow a CPA-prepared profit and loss statement to document income when traditional tax-return documentation does not fit the borrower’s situation. These programs can provide an option for business owners with complex tax situations or other documentation challenges. Rates and qualification requirements vary by program.
Asset Depletion / Asset Utilization Loans
This product serves borrowers with substantial assets and limited monthly income. Retirees who have not yet begun drawing from investments, or individuals who inherited wealth, may fit this profile.
Eligible assets can be converted into a monthly qualifying income figure using a program-specific calculation. For example, a program using an 84-month calculation would divide $1 million in eligible assets by 84, producing roughly $11,900 per month in qualifying income. The calculation and eligible assets vary by program.
DSCR Loans for Investors
Debt Service Coverage Ratio loans qualify an investment property primarily based on its rental income rather than the borrower’s personal earnings. They can be useful for investors who want qualification to focus on the property's cash flow.
Investors who hold property in an LLC should also review what Indiana investors get wrong about LLC and DSCR financing.
Not sure which nonQM product fits your income situation? Talk with Tevis Durbin before making your next offer on a home.
The NonQM Rate Premium Looks Different Once You Run the Numbers
The most common objection to nonQM loans is the higher interest rate. NonQM rates can run roughly one to two percentage points above conventional loans, depending on the program and documentation. The right comparison is the NonQM rate against the full cost of qualifying through conventional income documentation.
Tevis runs that comparison with every self-employed client, and the results are consistent enough to be instructive. He puts the decision in plain terms before walking through the numbers:
"You've got two choices. You can go back, refile your taxes, show more income. Of course, you're going to owe more money, so you're going to have to pay back taxes, pay back interest, pay back penalties. Or you can do a bank statement loan or a profit and loss loan and get a house today without refiling your taxes, but at a higher rate. Let's just do the math. Also keep in mind that the more interest you pay on this mortgage, chances are you're going to be able to write that off, thus paying even less in future taxes."
— Tevis Durbin, Producing Branch Manager (NMLS #424899)
The answer isn't always nonQM, because sometimes the math points to waiting, reporting more income, or choosing a different financing structure. The important step is comparing the total costs before deciding which path makes sense. Refiling taxes to show more income may require additional taxes, interest, and penalties.
Qualifying for a Bank Statement Loan Starts With Your Deposits
The review starts with your deposits from the most recent 24 months, often pulled securely from your bank account without sharing login credentials. Consistency matters more than the highest single month, so the team flags anything non-recurring and then asks for a business narrative. The narrative covers your industry, number of employees, and business structure.
For business bank statements, the borrower generally must own at least 25% of the business, depending on the program. From there, the expense ratio gets applied, and a qualifying income figure is established. Some NonQM lenders may still require IRS Form 4506-C, which authorizes tax transcript retrieval, even when returns aren't the primary income document.
Deductions can shrink your taxable income well below your real earnings. That gap between business cash flow and taxable income is one reason borrowers may consider NonQM documentation.
Credit requirements still apply, although they vary by program. Non-QM loans focus on alternative documentation rather than eliminating standard credit requirements. Most bank-statement options require 20% down, although some allow as little as 10%.
You Have More Options Than You Were Told
A previous lender’s answer that you do not qualify may only be true for the specific products that lender offers. Alternative documentation can give business owners, contractors, and 1099 professionals another path to mortgage qualification.
The Fannie Mae Selling Guide outlines conventional mortgage standards. The first step is understanding which product matches your income picture and how that product evaluates your income.
The Durbin Team works through that analysis with you so you can see exactly where you stand before making any decisions. Supreme Indiana’s loan programs overview lays out the full range of conventional and nonQM options.
NonQM Questions Self-Employed Borrowers Ask
Is a nonQM loan the same as a subprime loan?
No. NonQM describes loans that fall outside the Qualified Mortgage framework. The category includes alternative income documentation methods and does not automatically indicate weak credit. Program requirements vary by lender and borrower profile.
Who is a nonQM loan actually designed for?
NonQM loans can serve self-employed borrowers, 1099 earners, investors, and high-asset retirees whose financial profiles do not fit conventional qualification methods. If your business cash flow differs significantly from the income shown on your tax returns, a NonQM product may be worth exploring. Learn more about bank statement and NonQM loans to see how this type of financing can work for self-employed borrowers.
How much higher is the interest rate on a bank statement loan?
NonQM rates are generally higher than conventional rates, but the difference varies by program, credit profile, down payment, and documentation. Tevis can compare the rate premium with the costs and timing of qualifying through conventional financing.
What is an asset depletion loan, and who does it help most?
An asset depletion loan converts eligible investment or savings assets into a qualifying monthly income figure. It may help retirees and other borrowers with substantial assets but limited monthly income. Program rules determine which assets qualify and how the monthly income is calculated.
Do I need to own my entire business to use business bank statements?
No. Tevis's bank statement programs generally require at least 25% ownership of the business. Borrowers with a smaller ownership stake may need a different income documentation method.
Can a 1099 earner qualify using full gross income?
Some NonQM 1099 programs can use gross 1099 income rather than applying the same expense deductions used in conventional self-employment analysis. Tevis explains the approach in How Your 1099 Gross Income Can Qualify for an Indiana Mortgage.
How does a lender calculate qualifying income from bank statements?
The lender reviews eligible deposits across the applicable 12- or 24-month period and removes deposits that do not qualify as business income. The program then applies an expense ratio tied to factors such as the borrower’s industry and business type. For example, a service business with minimal overhead might use a 30% expense factor. A business with significant operating costs could use a higher factor. The resulting figure becomes the qualifying monthly income used in debt-to-income ratio (DTI) calculations.
The Path Forward Starts With the Right Conversation
If a conventional lender says you do not qualify, that does not necessarily mean you are out of options. NonQM products give self-employed borrowers, 1099 earners, investors, and high-asset retirees alternative ways to document income when conventional methods do not tell the full story.
Tevis and the Durbin team work through the numbers and documentation with borrowers across Indiana to identify the program that best fits their financial picture. Contact Supreme Indiana before your next offer to understand your options and move forward with a financing strategy built around your income.